Correlation Between VanEck Brazil and First Trust

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

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

Diversification Opportunities for VanEck Brazil and First Trust

0.98

Correlation Coefficient

VanEck Brazil  First Trust

Almost no diversification

The 3 months correlation between VanEck and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Brazil Small Cap 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 VanEck Brazil 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 VanEck Brazil Small Cap 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 VanEck Brazil i.e., VanEck Brazil and First Trust go up and down completely randomly.

Pair Corralation between VanEck Brazil and First Trust

Considering the 90-day investment horizon VanEck Brazil Small Cap is expected to under-perform the First Trust. In addition to that, VanEck Brazil is 1.13 times more volatile than First Trust Brazil. It trades about -0.15 of its total potential returns per unit of risk. First Trust Brazil is currently generating about -0.12 per unit of volatility. If you would invest  1,132  in First Trust Brazil on September 14, 2024 and sell it today you would lose (125.00) from holding First Trust Brazil or give up 11.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

VanEck Brazil Small Cap  vs.  First Trust Brazil

VanEck Brazil Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Brazil Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

First Trust Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with VanEck Brazil and First Trust

The main advantage of trading using opposite VanEck Brazil and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Brazil 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 VanEck Brazil Small Cap 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.