Correlation Between VF and First Trust
Can any of the company-specific risk be diversified away by investing in both VF 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 VF and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VF Corporation and First Trust Brazil, you can compare the effects of market volatilities on VF 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 VF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VF and First Trust.
Diversification Opportunities for VF and First Trust
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between VF and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and First Trust Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Brazil and VF 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 VF Corporation 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 Brazil has no effect on the direction of VF i.e., VF and First Trust go up and down completely randomly.
Pair Corralation between VF and First Trust
Considering the 90-day investment horizon VF Corporation is expected to under-perform the First Trust. In addition to that, VF is 2.32 times more volatile than First Trust Brazil. It trades about -0.27 of its total potential returns per unit of risk. First Trust Brazil is currently generating about -0.01 per unit of volatility. If you would invest 992.00 in First Trust Brazil on December 8, 2024 and sell it today you would lose (6.00) from holding First Trust Brazil or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VF Corp. vs. First Trust Brazil
Performance |
| Timeline |
| VF Corporation |
| First Trust Brazil |
VF and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VF and First Trust
The main advantage of trading using opposite VF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VF 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.The idea behind VF Corporation and First Trust Brazil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Trust vs. First Trust Latin | ||
| First Trust vs. First Trust Germany | ||
| First Trust vs. First Trust Japan | ||
| First Trust vs. First Trust Asia |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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