Correlation Between First Trust and VictoryShares USAA

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

By analyzing existing cross correlation between First Trust SkyBridge and VictoryShares USAA Core, you can compare the effects of market volatilities on First Trust and VictoryShares USAA 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 VictoryShares USAA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VictoryShares USAA.

Diversification Opportunities for First Trust and VictoryShares USAA

0.17

Correlation Coefficient

First Trust  VictoryShares USAA

Average diversification

The 3 months correlation between First and VictoryShares is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and VictoryShares USAA Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares USAA Core 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 SkyBridge are associated (or correlated) with VictoryShares USAA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares USAA Core has no effect on the direction of First Trust i.e., First Trust and VictoryShares USAA go up and down completely randomly.

Pair Corralation between First Trust and VictoryShares USAA

Given the investment horizon of 90 days First Trust SkyBridge is expected to under-perform the VictoryShares USAA. In addition to that, First Trust is 11.69 times more volatile than VictoryShares USAA Core. It trades about -0.35 of its total potential returns per unit of risk. VictoryShares USAA Core is currently generating about 0.18 per unit of volatility. If you would invest  4,605  in VictoryShares USAA Core on November 28, 2024 and sell it today you would earn a total of  48.00  from holding VictoryShares USAA Core or generate 1.04% return on investment over 90 days.

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

First Trust SkyBridge  vs.  VictoryShares USAA Core

First Trust SkyBridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust SkyBridge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

VictoryShares USAA Core

Risk-Adjusted Performance

Insignificant

Over the last 90 days VictoryShares USAA Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares USAA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and VictoryShares USAA

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

The idea behind First Trust SkyBridge and VictoryShares USAA Core 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.