Correlation Between VanEck Preferred and First Trust
Can any of the company-specific risk be diversified away by investing in both VanEck Preferred 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 Preferred 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 Preferred Securities and First Trust Senior, you can compare the effects of market volatilities on VanEck Preferred 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 Preferred with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Preferred and First Trust.
Diversification Opportunities for VanEck Preferred and First Trust
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VanEck and First is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Preferred Securities and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and VanEck Preferred 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 Preferred Securities 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 Senior has no effect on the direction of VanEck Preferred i.e., VanEck Preferred and First Trust go up and down completely randomly.
Pair Corralation between VanEck Preferred and First Trust
Given the investment horizon of 90 days VanEck Preferred Securities is expected to under-perform the First Trust. In addition to that, VanEck Preferred is 3.52 times more volatile than First Trust Senior. It trades about -0.02 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.14 per unit of volatility. If you would invest 4,601 in First Trust Senior on August 28, 2024 and sell it today you would earn a total of 24.00 from holding First Trust Senior or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Preferred Securities vs. First Trust Senior
Performance |
| Timeline |
| VanEck Preferred Sec |
| First Trust Senior |
VanEck Preferred and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Preferred and First Trust
The main advantage of trading using opposite VanEck Preferred and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Preferred 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 Preferred vs. ETF Series Solutions | VanEck Preferred vs. Aquagold International | VanEck Preferred vs. Morningstar Unconstrained Allocation | VanEck Preferred vs. High Yield Municipal Fund |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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