Correlation Between First Trust and VanEck Green

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

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

Diversification Opportunities for First Trust and VanEck Green

0.85

Correlation Coefficient

First Trust  VanEck Green

Very poor diversification

The 3 months correlation between First and VanEck is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Growth and VanEck Green Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Green Infrast 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 Growth are associated (or correlated) with VanEck Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Green Infrast has no effect on the direction of First Trust i.e., First Trust and VanEck Green go up and down completely randomly.

Pair Corralation between First Trust and VanEck Green

Given the investment horizon of 90 days First Trust Growth is expected to generate 0.88 times more return on investment than VanEck Green. However, First Trust Growth is 1.13 times less risky than VanEck Green. It trades about -0.06 of its potential returns per unit of risk. VanEck Green Infrastructure is currently generating about -0.08 per unit of risk. If you would invest  3,142  in First Trust Growth on December 28, 2024 and sell it today you would lose (126.00) from holding First Trust Growth or give up 4.01% of portfolio value over 90 days.

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

First Trust Growth  vs.  VanEck Green Infrastructure

First Trust Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Green Infrast

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Green Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, VanEck Green is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and VanEck Green

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

The idea behind First Trust Growth and VanEck Green Infrastructure 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.