Correlation Between VanEck Green and First Trust

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

By analyzing existing cross correlation between VanEck Green Infrastructure and First Trust Growth, you can compare the effects of market volatilities on VanEck Green and First Trust 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 VanEck Green with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Green and First Trust.

Diversification Opportunities for VanEck Green and First Trust

0.85

Correlation Coefficient

VanEck Green  First Trust

Very poor diversification

The 3 months correlation between VanEck and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Green Infrastructure and First Trust Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Growth and VanEck Green 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 VanEck Green Infrastructure are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Growth has no effect on the direction of VanEck Green i.e., VanEck Green and First Trust go up and down completely randomly.

Pair Corralation between VanEck Green and First Trust

Given the investment horizon of 90 days VanEck Green Infrastructure is expected to under-perform the First Trust. In addition to that, VanEck Green is 1.13 times more volatile than First Trust Growth. It trades about -0.08 of its total potential returns per unit of risk. First Trust Growth is currently generating about -0.06 per unit of volatility. If you would invest  3,142  in First Trust Growth on December 28, 2024 and sell it today you would lose (126.00) from holding First Trust Growth or give up 4.01% of portfolio value over 90 days.

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

VanEck Green Infrastructure  vs.  First Trust Growth

VanEck Green Infrast

Risk-Adjusted Performance

Very Weak

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

First Trust Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VanEck Green and First Trust

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

The idea behind VanEck Green Infrastructure and First Trust Growth 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.