Correlation Between First Trust and Cboe Vest

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

By analyzing existing cross correlation between First Trust TCW and Cboe Vest 10, you can compare the effects of market volatilities on First Trust and Cboe Vest 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 Cboe Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Cboe Vest.

Diversification Opportunities for First Trust and Cboe Vest

-0.86

Correlation Coefficient

First Trust  Cboe Vest

Pay attention - limited upside

The 3 months correlation between First and Cboe is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Cboe Vest 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest 10 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 TCW are associated (or correlated) with Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest 10 has no effect on the direction of First Trust i.e., First Trust and Cboe Vest go up and down completely randomly.

Pair Corralation between First Trust and Cboe Vest

Given the investment horizon of 90 days First Trust TCW is expected to generate 0.15 times more return on investment than Cboe Vest. However, First Trust TCW is 6.62 times less risky than Cboe Vest. It trades about 0.16 of its potential returns per unit of risk. Cboe Vest 10 is currently generating about -0.05 per unit of risk. If you would invest  2,445  in First Trust TCW on December 28, 2024 and sell it today you would earn a total of  34.00  from holding First Trust TCW or generate 1.39% return on investment over 90 days.

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

First Trust TCW  vs.  Cboe Vest 10

First Trust TCW

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cboe Vest 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cboe Vest 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Vest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Cboe Vest

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

The idea behind First Trust TCW and Cboe Vest 10 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 Global Correlations module to find global opportunities by holding instruments from different markets.