Correlation Between VanEck CMCI and First Trust

Can any of the company-specific risk be diversified away by investing in both VanEck CMCI 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 CMCI 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 CMCI Commodity and First Trust RBA, you can compare the effects of market volatilities on VanEck CMCI 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 CMCI with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck CMCI and First Trust.

Diversification Opportunities for VanEck CMCI and First Trust

-0.13

Correlation Coefficient

VanEck CMCI  First Trust

Good diversification

The 3 months correlation between VanEck and First is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding VanEck CMCI Commodity and First Trust RBA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RBA and VanEck CMCI 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 CMCI Commodity 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 RBA has no effect on the direction of VanEck CMCI i.e., VanEck CMCI and First Trust go up and down completely randomly.

Pair Corralation between VanEck CMCI and First Trust

Given the investment horizon of 90 days VanEck CMCI is expected to generate 5.86 times less return on investment than First Trust. But when comparing it to its historical volatility, VanEck CMCI Commodity is 1.89 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust RBA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,940  in First Trust RBA on October 23, 2024 and sell it today you would earn a total of  3,486  from holding First Trust RBA or generate 70.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.52%
Values	Daily Returns

VanEck CMCI Commodity  vs.  First Trust RBA

VanEck CMCI Commodity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck CMCI Commodity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, VanEck CMCI is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

First Trust RBA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust RBA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VanEck CMCI and First Trust

The main advantage of trading using opposite VanEck CMCI and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck CMCI 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 CMCI Commodity and First Trust RBA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..