Correlation Between First Trust and VanEck Vectors
Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Vectors at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and VanEck Vectors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Materials and VanEck Vectors ETF, you can compare the effects of market volatilities on First Trust and VanEck Vectors and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of VanEck Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Vectors.
Diversification Opportunities for First Trust and VanEck Vectors
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and VanEck is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Materials and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Materials are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of First Trust i.e., First Trust and VanEck Vectors go up and down completely randomly.
Pair Corralation between First Trust and VanEck Vectors
Considering the 90-day investment horizon First Trust Materials is expected to generate 0.63 times more return on investment than VanEck Vectors. However, First Trust Materials is 1.58 times less risky than VanEck Vectors. It trades about 0.02 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about -0.01 per unit of risk. If you would invest 6,211 in First Trust Materials on August 28, 2024 and sell it today you would earn a total of 380.00 from holding First Trust Materials or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Materials vs. VanEck Vectors ETF
Performance |
| Timeline |
| First Trust Materials |
| VanEck Vectors ETF |
First Trust and VanEck Vectors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and VanEck Vectors
The main advantage of trading using opposite First Trust and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Vectors can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in VanEck Vectors will offset losses from the drop in VanEck Vectors' long position.| First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Financials | First Trust vs. First Trust Energy |
| VanEck Vectors vs. Gogoro Inc | VanEck Vectors vs. Global X Disruptive | VanEck Vectors vs. Gulf Island Fabrication | VanEck Vectors vs. VanEck Green Bond |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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