Correlation Between First Trust and Vident Core

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

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

Diversification Opportunities for First Trust and Vident Core

-0.56

Correlation Coefficient

First Trust  Vident Core

Excellent diversification

The 3 months correlation between First and Vident is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Eurozone and Vident Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Equity 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 Eurozone are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Equity has no effect on the direction of First Trust i.e., First Trust and Vident Core go up and down completely randomly.

Pair Corralation between First Trust and Vident Core

Given the investment horizon of 90 days First Trust Eurozone is expected to generate 0.73 times more return on investment than Vident Core. However, First Trust Eurozone is 1.38 times less risky than Vident Core. It trades about -0.26 of its potential returns per unit of risk. Vident Core Equity is currently generating about -0.21 per unit of risk. If you would invest  4,180  in First Trust Eurozone on October 7, 2024 and sell it today you would lose (154.00) from holding First Trust Eurozone or give up 3.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

First Trust Eurozone  vs.  Vident Core Equity

First Trust Eurozone

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vident Core Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vident Core Equity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Vident Core

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

The idea behind First Trust Eurozone and Vident Core Equity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.