Correlation Between First Trust and Virtus WMC
Can any of the company-specific risk be diversified away by investing in both First Trust and Virtus WMC 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 Virtus WMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Nasdaq and Virtus WMC International, you can compare the effects of market volatilities on First Trust and Virtus WMC 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 Virtus WMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Virtus WMC.
Diversification Opportunities for First Trust and Virtus WMC
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and Virtus is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Virtus WMC International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus WMC International 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 Nasdaq are associated (or correlated) with Virtus WMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus WMC International has no effect on the direction of First Trust i.e., First Trust and Virtus WMC go up and down completely randomly.
Pair Corralation between First Trust and Virtus WMC
Given the investment horizon of 90 days First Trust Nasdaq is expected to generate 0.83 times more return on investment than Virtus WMC. However, First Trust Nasdaq is 1.21 times less risky than Virtus WMC. It trades about 0.21 of its potential returns per unit of risk. Virtus WMC International is currently generating about -0.12 per unit of risk. If you would invest 1,974 in First Trust Nasdaq on September 14, 2024 and sell it today you would earn a total of 150.90 from holding First Trust Nasdaq or generate 7.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 98.44% |
Values | Daily Returns |
First Trust Nasdaq vs. Virtus WMC International
Performance |
Timeline |
First Trust Nasdaq |
Virtus WMC International |
First Trust and Virtus WMC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and Virtus WMC
The main advantage of trading using opposite First Trust and Virtus WMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Virtus WMC 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 Virtus WMC will offset losses from the drop in Virtus WMC's long position.First Trust vs. Global X SP | First Trust vs. Amplify CWP Enhanced | First Trust vs. NEOS ETF Trust | First Trust vs. FT Cboe Vest |
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Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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