Correlation Between VanEck Low and First Trust

Can any of the company-specific risk be diversified away by investing in both VanEck Low 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 Low 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 Low Carbon and First Trust Global, you can compare the effects of market volatilities on VanEck Low 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 Low with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Low and First Trust.

Diversification Opportunities for VanEck Low and First Trust

0.88

Correlation Coefficient

VanEck Low  First Trust

Very poor diversification

The 3 months correlation between VanEck and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Low Carbon and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and VanEck Low 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 Low Carbon 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 Global has no effect on the direction of VanEck Low i.e., VanEck Low and First Trust go up and down completely randomly.

Pair Corralation between VanEck Low and First Trust

Given the investment horizon of 90 days VanEck Low is expected to generate 2.39 times less return on investment than First Trust. In addition to that, VanEck Low is 1.14 times more volatile than First Trust Global. It trades about 0.01 of its total potential returns per unit of risk. First Trust Global is currently generating about 0.02 per unit of volatility. If you would invest  1,488  in First Trust Global on September 14, 2024 and sell it today you would earn a total of  44.00  from holding First Trust Global or generate 2.96% return on investment over 90 days.

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

VanEck Low Carbon  vs.  First Trust Global

VanEck Low Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Low Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Low is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VanEck Low and First Trust

The main advantage of trading using opposite VanEck Low and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Low 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 Low Carbon and First Trust Global 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.