Correlation Between VictoryShares Multi and First Trust
Can any of the company-specific risk be diversified away by investing in both VictoryShares Multi 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 VictoryShares Multi and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VictoryShares Multi Factor Minimum and First Trust California, you can compare the effects of market volatilities on VictoryShares Multi 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 VictoryShares Multi with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares Multi and First Trust.
Diversification Opportunities for VictoryShares Multi and First Trust
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VictoryShares and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares Multi Factor Min and First Trust California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust California and VictoryShares Multi 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 VictoryShares Multi Factor Minimum 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 California has no effect on the direction of VictoryShares Multi i.e., VictoryShares Multi and First Trust go up and down completely randomly.
Pair Corralation between VictoryShares Multi and First Trust
Given the investment horizon of 90 days VictoryShares Multi Factor Minimum is expected to generate 1.63 times more return on investment than First Trust. However, VictoryShares Multi is 1.63 times more volatile than First Trust California. It trades about 0.32 of its potential returns per unit of risk. First Trust California is currently generating about 0.02 per unit of risk. If you would invest 4,776 in VictoryShares Multi Factor Minimum on November 3, 2024 and sell it today you would earn a total of 141.00 from holding VictoryShares Multi Factor Minimum or generate 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VictoryShares Multi Factor Min vs. First Trust California
Performance |
| Timeline |
| VictoryShares Multi |
| First Trust California |
VictoryShares Multi and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VictoryShares Multi and First Trust
The main advantage of trading using opposite VictoryShares Multi and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares Multi 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 VictoryShares Multi Factor Minimum and First Trust California 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 Municipal | First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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