Correlation Between VictoryShares Multi and First Trust

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

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

Diversification Opportunities for VictoryShares Multi and First Trust

0.06

Correlation Coefficient

VictoryShares Multi  First Trust

Significant diversification

The 3 months correlation between VictoryShares and First is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares Multi Factor Min and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low and VictoryShares Multi 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 VictoryShares Multi Factor Minimum 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 Low has no effect on the direction of VictoryShares Multi i.e., VictoryShares Multi and First Trust go up and down completely randomly.

Pair Corralation between VictoryShares Multi and First Trust

Given the investment horizon of 90 days VictoryShares Multi is expected to generate 11.05 times less return on investment than First Trust. In addition to that, VictoryShares Multi is 4.38 times more volatile than First Trust Low. It trades about 0.0 of its total potential returns per unit of risk. First Trust Low is currently generating about 0.17 per unit of volatility. If you would invest  1,856  in First Trust Low on December 30, 2024 and sell it today you would earn a total of  28.00  from holding First Trust Low or generate 1.51% return on investment over 90 days.

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

VictoryShares Multi Factor Min  vs.  First Trust Low

VictoryShares Multi

Risk-Adjusted Performance

Very Weak

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

First Trust Low

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Low are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VictoryShares Multi and First Trust

The main advantage of trading using opposite VictoryShares Multi and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares Multi 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 VictoryShares Multi Factor Minimum and First Trust Low 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.