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 Latin, 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

0.94

Correlation Coefficient

VanEck Brazil  First Trust

Almost no diversification

The 3 months correlation between VanEck and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Brazil Small Cap and First Trust Latin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Latin 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 Latin 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 1.48 times more volatile than First Trust Latin. It trades about -0.14 of its total potential returns per unit of risk. First Trust Latin is currently generating about -0.09 per unit of volatility. If you would invest  1,768  in First Trust Latin on September 12, 2024 and sell it today you would lose (112.50) from holding First Trust Latin or give up 6.36% 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 Latin

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 Latin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Latin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Latin 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.