Correlation Between NEOS Russell and FT Vest

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

By analyzing existing cross correlation between NEOS Russell 2000 and FT Vest Equity, you can compare the effects of market volatilities on NEOS Russell and FT 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 NEOS Russell with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEOS Russell and FT Vest.

Diversification Opportunities for NEOS Russell and FT Vest

-0.24

Correlation Coefficient

NEOS Russell  FT Vest

Very good diversification

The 3 months correlation between NEOS and DHDG is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NEOS Russell 2000 and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and NEOS Russell 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 NEOS Russell 2000 are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of NEOS Russell i.e., NEOS Russell and FT Vest go up and down completely randomly.

Pair Corralation between NEOS Russell and FT Vest

Given the investment horizon of 90 days NEOS Russell 2000 is expected to generate 2.03 times more return on investment than FT Vest. However, NEOS Russell is 2.03 times more volatile than FT Vest Equity. It trades about 0.21 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.18 per unit of risk. If you would invest  4,807  in NEOS Russell 2000 on September 4, 2024 and sell it today you would earn a total of  537.00  from holding NEOS Russell 2000 or generate 11.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.44%
Values	Daily Returns

NEOS Russell 2000  vs.  FT Vest Equity

NEOS Russell 2000

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NEOS Russell 2000 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, NEOS Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEOS Russell and FT Vest

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

The idea behind NEOS Russell 2000 and FT Vest Equity 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.