Correlation Between First Trust and VictoryShares International

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

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

Diversification Opportunities for First Trust and VictoryShares International

0.57

Correlation Coefficient

First Trust  VictoryShares International

Very weak diversification

The 3 months correlation between First and VictoryShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Equity and VictoryShares International Vo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 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 Equity are associated (or correlated) with VictoryShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares International has no effect on the direction of First Trust i.e., First Trust and VictoryShares International go up and down completely randomly.

Pair Corralation between First Trust and VictoryShares International

Given the investment horizon of 90 days First Trust Equity is expected to under-perform the VictoryShares International. In addition to that, First Trust is 1.02 times more volatile than VictoryShares International Volatility. It trades about -0.07 of its total potential returns per unit of risk. VictoryShares International Volatility is currently generating about 0.07 per unit of volatility. If you would invest  4,341  in VictoryShares International Volatility on December 2, 2024 and sell it today you would earn a total of  131.00  from holding VictoryShares International Volatility or generate 3.02% return on investment over 90 days.

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

First Trust Equity  vs.  VictoryShares International Vo

First Trust Equity

Risk-Adjusted Performance

Very Weak

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

VictoryShares International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares International Volatility are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, VictoryShares International is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First Trust and VictoryShares International

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

The idea behind First Trust Equity and VictoryShares International Volatility 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.