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 Equity and First Trust Emerging, 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
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vident and First is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Equity and First Trust Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Emerging 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 Equity 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 Emerging 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 Equity is expected to generate 1.45 times more return on investment than First Trust. However, Vident Core is 1.45 times more volatile than First Trust Emerging. It trades about 0.21 of its potential returns per unit of risk. First Trust Emerging is currently generating about -0.27 per unit of risk. If you would invest 5,719 in Vident Core Equity on August 28, 2024 and sell it today you would earn a total of 424.00 from holding Vident Core Equity or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vident Core Equity vs. First Trust Emerging
Performance |
| Timeline |
| Vident Core Equity |
| First Trust Emerging |
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 International Equity | Vident Core vs. Vident Core Bond | Vident Core vs. VictoryShares 500 Enhanced | Vident Core vs. First Trust Eurozone |
| First Trust vs. First Trust SSI | First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Managed | First Trust vs. First Trust Tactical |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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