Correlation Between VanEck Oil and First Trust
Can any of the company-specific risk be diversified away by investing in both VanEck Oil and First Trust 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 VanEck Oil and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Oil Services and First Trust Natural, you can compare the effects of market volatilities on VanEck Oil and First Trust 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 VanEck Oil with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Oil and First Trust.
Diversification Opportunities for VanEck Oil and First Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VanEck and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Services and First Trust Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Natural and VanEck Oil 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 VanEck Oil Services are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Natural has no effect on the direction of VanEck Oil i.e., VanEck Oil and First Trust go up and down completely randomly.
Pair Corralation between VanEck Oil and First Trust
Considering the 90-day investment horizon VanEck Oil Services is expected to generate 1.18 times more return on investment than First Trust. However, VanEck Oil is 1.18 times more volatile than First Trust Natural. It trades about 0.02 of its potential returns per unit of risk. First Trust Natural is currently generating about 0.03 per unit of risk. If you would invest 26,449 in VanEck Oil Services on August 30, 2024 and sell it today you would earn a total of 3,675 from holding VanEck Oil Services or generate 13.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Oil Services vs. First Trust Natural
Performance |
| Timeline |
| VanEck Oil Services |
| First Trust Natural |
VanEck Oil and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Oil and First Trust
The main advantage of trading using opposite VanEck Oil and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Oil position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| VanEck Oil vs. SPDR SP Oil | VanEck Oil vs. Energy Select Sector | VanEck Oil vs. VanEck Semiconductor ETF | VanEck Oil vs. Materials Select Sector |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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