Correlation Between VIIX and First Trust
Can any of the company-specific risk be diversified away by investing in both VIIX 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 VIIX and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VIIX and First Trust NASDAQ, you can compare the effects of market volatilities on VIIX 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 VIIX with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIIX and First Trust.
Diversification Opportunities for VIIX and First Trust
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VIIX and First is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding VIIX and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and VIIX 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 VIIX 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 NASDAQ has no effect on the direction of VIIX i.e., VIIX and First Trust go up and down completely randomly.
Pair Corralation between VIIX and First Trust
Given the investment horizon of 90 days VIIX is expected to under-perform the First Trust. In addition to that, VIIX is 3.15 times more volatile than First Trust NASDAQ. It trades about -0.14 of its total potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.06 per unit of volatility. If you would invest 9,134 in First Trust NASDAQ on August 23, 2024 and sell it today you would earn a total of 3,215 from holding First Trust NASDAQ or generate 35.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 32.06% |
| Values | Daily Returns |
VIIX vs. First Trust NASDAQ
Performance |
| Timeline |
| VIIX |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust NASDAQ |
VIIX and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VIIX and First Trust
The main advantage of trading using opposite VIIX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIIX 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.| VIIX vs. Invesco DB Dollar | VIIX vs. iPath Series B | VIIX vs. ProShares VIX Short Term | VIIX vs. ProShares VIX Mid Term |
| First Trust vs. First Trust Global | First Trust vs. Invesco Global Clean | First Trust vs. ALPS Clean Energy | First Trust vs. SPDR Kensho Clean |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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