Correlation Between First Trust and VanEck Video

Can any of the company-specific risk be diversified away by investing in both First Trust and VanEck Video 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 First Trust and VanEck Video into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust S Network and VanEck Video Gaming, you can compare the effects of market volatilities on First Trust and VanEck Video 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 First Trust with a short position of VanEck Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Video.

Diversification Opportunities for First Trust and VanEck Video

0.98

Correlation Coefficient

First Trust  VanEck Video

Almost no diversification

The 3 months correlation between First and VanEck is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and VanEck Video Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Video Gaming and First Trust 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 First Trust S Network are associated (or correlated) with VanEck Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Video Gaming has no effect on the direction of First Trust i.e., First Trust and VanEck Video go up and down completely randomly.

Pair Corralation between First Trust and VanEck Video

Given the investment horizon of 90 days First Trust S Network is expected to generate 0.8 times more return on investment than VanEck Video. However, First Trust S Network is 1.24 times less risky than VanEck Video. It trades about 0.02 of its potential returns per unit of risk. VanEck Video Gaming is currently generating about -0.01 per unit of risk. If you would invest  2,832  in First Trust S Network on October 22, 2024 and sell it today you would earn a total of  6.40  from holding First Trust S Network or generate 0.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

First Trust S Network  vs.  VanEck Video Gaming

First Trust S

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

VanEck Video Gaming

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Video Gaming are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, VanEck Video displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and VanEck Video

The main advantage of trading using opposite First Trust and VanEck Video positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Video 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 VanEck Video will offset losses from the drop in VanEck Video's long position.

The idea behind First Trust S Network and VanEck Video Gaming 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.