Correlation Between First Trust and Virtus Duff

Can any of the company-specific risk be diversified away by investing in both First Trust and Virtus Duff 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 Duff 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 Duff Phelps, you can compare the effects of market volatilities on First Trust and Virtus Duff 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 Duff. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Virtus Duff.

Diversification Opportunities for First Trust and Virtus Duff

0.49

Correlation Coefficient

First Trust  Virtus Duff

Very weak diversification

The 3 months correlation between First and Virtus is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Virtus Duff Phelps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Duff Phelps 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 Duff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Duff Phelps has no effect on the direction of First Trust i.e., First Trust and Virtus Duff go up and down completely randomly.

Pair Corralation between First Trust and Virtus Duff

Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the Virtus Duff. In addition to that, First Trust is 1.59 times more volatile than Virtus Duff Phelps. It trades about -0.12 of its total potential returns per unit of risk. Virtus Duff Phelps is currently generating about 0.01 per unit of volatility. If you would invest  1,688  in Virtus Duff Phelps on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Virtus Duff Phelps or generate 0.18% return on investment over 90 days.

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

First Trust NASDAQ  vs.  Virtus Duff Phelps

First Trust NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Virtus Duff Phelps

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Duff Phelps has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Virtus Duff is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Virtus Duff

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

The idea behind First Trust NASDAQ and Virtus Duff Phelps 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..