Correlation Between First Trust and VanEck CMCI

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

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

Diversification Opportunities for First Trust and VanEck CMCI

0.5

Correlation Coefficient

First Trust  VanEck CMCI

Very weak diversification

The 3 months correlation between First and VanEck is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Global and VanEck CMCI Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck CMCI Commodity 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 Global are associated (or correlated) with VanEck CMCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck CMCI Commodity has no effect on the direction of First Trust i.e., First Trust and VanEck CMCI go up and down completely randomly.

Pair Corralation between First Trust and VanEck CMCI

Given the investment horizon of 90 days First Trust Global is expected to generate 0.62 times more return on investment than VanEck CMCI. However, First Trust Global is 1.62 times less risky than VanEck CMCI. It trades about 0.17 of its potential returns per unit of risk. VanEck CMCI Commodity is currently generating about 0.07 per unit of risk. If you would invest  2,377  in First Trust Global on December 28, 2024 and sell it today you would earn a total of  155.00  from holding First Trust Global or generate 6.52% return on investment over 90 days.

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

First Trust Global  vs.  VanEck CMCI Commodity

First Trust Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

VanEck CMCI Commodity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck CMCI Commodity are ranked lower than 5 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and VanEck CMCI

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

The idea behind First Trust Global and VanEck CMCI Commodity 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.