Correlation Between First Trust and VanEck JP

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

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

Diversification Opportunities for First Trust and VanEck JP

-0.78

Correlation Coefficient

First Trust  VanEck JP

Pay attention - limited upside

The 3 months correlation between First and VanEck is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SSI and VanEck JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck JP Morgan 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 SSI are associated (or correlated) with VanEck JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck JP Morgan has no effect on the direction of First Trust i.e., First Trust and VanEck JP go up and down completely randomly.

Pair Corralation between First Trust and VanEck JP

Given the investment horizon of 90 days First Trust SSI is expected to generate 1.22 times more return on investment than VanEck JP. However, First Trust is 1.22 times more volatile than VanEck JP Morgan. It trades about 0.24 of its potential returns per unit of risk. VanEck JP Morgan is currently generating about -0.14 per unit of risk. If you would invest  3,497  in First Trust SSI on September 18, 2024 and sell it today you would earn a total of  315.00  from holding First Trust SSI or generate 9.01% return on investment over 90 days.

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

First Trust SSI  vs.  VanEck JP Morgan

First Trust SSI

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SSI are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and VanEck JP

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

The idea behind First Trust SSI and VanEck JP Morgan 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.