Correlation Between First Trust and VanEck Morningstar

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

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

Diversification Opportunities for First Trust and VanEck Morningstar

0.88

Correlation Coefficient

First Trust  VanEck Morningstar

Very poor diversification

The 3 months correlation between First and VanEck is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intl and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar 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 Intl are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar has no effect on the direction of First Trust i.e., First Trust and VanEck Morningstar go up and down completely randomly.

Pair Corralation between First Trust and VanEck Morningstar

Considering the 90-day investment horizon First Trust Intl is expected to under-perform the VanEck Morningstar. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Intl is 1.29 times less risky than VanEck Morningstar. The etf trades about -0.03 of its potential returns per unit of risk. The VanEck Morningstar International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,273  in VanEck Morningstar International on September 12, 2024 and sell it today you would earn a total of  53.00  from holding VanEck Morningstar International or generate 1.62% return on investment over 90 days.

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

First Trust Intl  vs.  VanEck Morningstar Internation

First Trust Intl

Risk-Adjusted Performance

0 of 100

Very Weak

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

VanEck Morningstar

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck Morningstar is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and VanEck Morningstar

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

The idea behind First Trust Intl and VanEck Morningstar International 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 Commodity Directory module to find actively traded commodities issued by global exchanges.