Correlation Between FT Cboe and FT Vest

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

By analyzing existing cross correlation between FT Cboe Vest and FT Vest NASDAQ 100, you can compare the effects of market volatilities on FT Cboe and FT Vest 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 FT Cboe with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and FT Vest.

Diversification Opportunities for FT Cboe and FT Vest

0.68

Correlation Coefficient

FT Cboe  FT Vest

Poor diversification

The 3 months correlation between DNOV and QMMY is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and FT Vest NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest NASDAQ and FT Cboe 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 FT Cboe Vest are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest NASDAQ has no effect on the direction of FT Cboe i.e., FT Cboe and FT Vest go up and down completely randomly.

Pair Corralation between FT Cboe and FT Vest

Given the investment horizon of 90 days FT Cboe Vest is expected to under-perform the FT Vest. But the etf apears to be less risky and, when comparing its historical volatility, FT Cboe Vest is 1.06 times less risky than FT Vest. The etf trades about 0.0 of its potential returns per unit of risk. The FT Vest NASDAQ 100 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,165  in FT Vest NASDAQ 100 on December 1, 2024 and sell it today you would lose (2.00) from holding FT Vest NASDAQ 100 or give up 0.09% of portfolio value over 90 days.

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

FT Cboe Vest  vs.  FT Vest NASDAQ 100

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FT Vest NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Vest NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, FT Vest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FT Cboe and FT Vest

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

The idea behind FT Cboe Vest and FT Vest NASDAQ 100 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.