Correlation Between First Trust and Virtus ETF

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

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

Diversification Opportunities for First Trust and Virtus ETF

0.71

Correlation Coefficient

First Trust  Virtus ETF

Poor diversification

The 3 months correlation between First and Virtus is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Virtus ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus ETF Trust 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 Senior are associated (or correlated) with Virtus ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus ETF Trust has no effect on the direction of First Trust i.e., First Trust and Virtus ETF go up and down completely randomly.

Pair Corralation between First Trust and Virtus ETF

Given the investment horizon of 90 days First Trust Senior is expected to generate 0.75 times more return on investment than Virtus ETF. However, First Trust Senior is 1.34 times less risky than Virtus ETF. It trades about 0.11 of its potential returns per unit of risk. Virtus ETF Trust is currently generating about 0.05 per unit of risk. If you would invest  4,548  in First Trust Senior on December 28, 2024 and sell it today you would earn a total of  22.00  from holding First Trust Senior or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

First Trust Senior  vs.  Virtus ETF Trust

First Trust Senior

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Virtus ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Virtus ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Virtus ETF

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

The idea behind First Trust Senior and Virtus ETF Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.