Correlation Between FT Vest and Vulcan Value

Can any of the company-specific risk be diversified away by investing in both FT Vest and Vulcan Value 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 FT Vest and Vulcan Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest NASDAQ 100 and Vulcan Value Partners, you can compare the effects of market volatilities on FT Vest and Vulcan Value 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 FT Vest with a short position of Vulcan Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and Vulcan Value.

Diversification Opportunities for FT Vest and Vulcan Value

-0.55

Correlation Coefficient

FT Vest  Vulcan Value

Excellent diversification

The 3 months correlation between QCAP and Vulcan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest NASDAQ 100 and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners and FT Vest 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 FT Vest NASDAQ 100 are associated (or correlated) with Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of FT Vest i.e., FT Vest and Vulcan Value go up and down completely randomly.

Pair Corralation between FT Vest and Vulcan Value

Given the investment horizon of 90 days FT Vest is expected to generate 1.02 times less return on investment than Vulcan Value. But when comparing it to its historical volatility, FT Vest NASDAQ 100 is 3.34 times less risky than Vulcan Value. It trades about 0.27 of its potential returns per unit of risk. Vulcan Value Partners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Vulcan Value Partners on October 20, 2024 and sell it today you would earn a total of  16.00  from holding Vulcan Value Partners or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

FT Vest NASDAQ 100  vs.  Vulcan Value Partners

FT Vest NASDAQ

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest NASDAQ 100 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, FT Vest is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Vulcan Value Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcan Value Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with FT Vest and Vulcan Value

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

The idea behind FT Vest NASDAQ 100 and Vulcan Value Partners 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.