Correlation Between First Trust and Vident Core
Can any of the company-specific risk be diversified away by investing in both First Trust and Vident Core 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 Vident Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Vident Core Equity, you can compare the effects of market volatilities on First Trust and Vident Core 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 Vident Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vident Core.
Diversification Opportunities for First Trust and Vident Core
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Vident is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Vident Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Equity 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 Dorsey are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Equity has no effect on the direction of First Trust i.e., First Trust and Vident Core go up and down completely randomly.
Pair Corralation between First Trust and Vident Core
Considering the 90-day investment horizon First Trust Dorsey is expected to under-perform the Vident Core. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Dorsey is 1.19 times less risky than Vident Core. The etf trades about -0.07 of its potential returns per unit of risk. The Vident Core Equity is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,823 in Vident Core Equity on August 31, 2024 and sell it today you would earn a total of 351.00 from holding Vident Core Equity or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. Vident Core Equity
Performance |
| Timeline |
| First Trust Dorsey |
| Vident Core Equity |
First Trust and Vident Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vident Core
The main advantage of trading using opposite First Trust and Vident Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vident Core 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 Vident Core will offset losses from the drop in Vident Core's long position.| First Trust vs. First Trust Dorsey | First Trust vs. First Trust Emerging | First Trust vs. First Trust Dorsey | First Trust vs. First Trust Developed |
| Vident Core vs. Vident International Equity | Vident Core vs. Vident Core Bond | Vident Core vs. VictoryShares 500 Enhanced | Vident Core vs. First Trust Eurozone |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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