Correlation Between VictoryShares USAA and First Trust
Can any of the company-specific risk be diversified away by investing in both VictoryShares USAA 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 USAA 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 USAA Core and First Trust Enhanced, you can compare the effects of market volatilities on VictoryShares USAA 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 USAA with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares USAA and First Trust.
Diversification Opportunities for VictoryShares USAA and First Trust
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VictoryShares and First is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares USAA Core and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and VictoryShares USAA 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 USAA Core 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 Enhanced has no effect on the direction of VictoryShares USAA i.e., VictoryShares USAA and First Trust go up and down completely randomly.
Pair Corralation between VictoryShares USAA and First Trust
Given the investment horizon of 90 days VictoryShares USAA Core is expected to under-perform the First Trust. In addition to that, VictoryShares USAA is 10.63 times more volatile than First Trust Enhanced. It trades about -0.23 of its total potential returns per unit of risk. First Trust Enhanced is currently generating about 0.41 per unit of volatility. If you would invest 5,957 in First Trust Enhanced on January 26, 2024 and sell it today you would earn a total of 18.00 from holding First Trust Enhanced or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
VictoryShares USAA Core vs. First Trust Enhanced
Performance |
| Timeline |
| VictoryShares USAA Core |
| First Trust Enhanced |
VictoryShares USAA and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VictoryShares USAA and First Trust
The main advantage of trading using opposite VictoryShares USAA and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares USAA 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.| VictoryShares USAA vs. Vanguard Total International | VictoryShares USAA vs. Vanguard Total International | VictoryShares USAA vs. Vanguard Total Stock | VictoryShares USAA vs. Vanguard Real Estate |
| First Trust vs. iShares ESG 1 5 | First Trust vs. First Trust Low | First Trust vs. First Trust Managed | First Trust vs. First Trust Senior |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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