Correlation Between Vident Core and First Trust
Can any of the company-specific risk be diversified away by investing in both Vident Core 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 Vident Core and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vident Core Bond and First Trust Eurozone, you can compare the effects of market volatilities on Vident Core 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 Vident Core with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vident Core and First Trust.
Diversification Opportunities for Vident Core and First Trust
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vident and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Bond and First Trust Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Eurozone and Vident Core 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 Vident Core Bond 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 Eurozone has no effect on the direction of Vident Core i.e., Vident Core and First Trust go up and down completely randomly.
Pair Corralation between Vident Core and First Trust
Given the investment horizon of 90 days Vident Core Bond is expected to generate 0.33 times more return on investment than First Trust. However, Vident Core Bond is 3.07 times less risky than First Trust. It trades about -0.13 of its potential returns per unit of risk. First Trust Eurozone is currently generating about -0.18 per unit of risk. If you would invest 4,457 in Vident Core Bond on August 28, 2024 and sell it today you would lose (89.00) from holding Vident Core Bond or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vident Core Bond vs. First Trust Eurozone
Performance |
| Timeline |
| Vident Core Bond |
| First Trust Eurozone |
Vident Core and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vident Core and First Trust
The main advantage of trading using opposite Vident Core and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vident Core 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.| Vident Core vs. Vident Core Equity | Vident Core vs. Vident International Equity | Vident Core vs. Invesco Variable Rate | Vident Core vs. FlexShares Credit Scored Corporate |
| First Trust vs. WisdomTree International Hedged | First Trust vs. WisdomTree Emerging Markets | First Trust vs. WisdomTree Dynamic Currency |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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