# Correlation Between First Trust and Vident Core

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Can any of the company-specific risk be diversified away by investing in both First Trust and Vident Core 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 Vident Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust TCW and Vident Core Bond, you can compare the effects of market volatilities on First Trust and Vident Core 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 Vident Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vident Core.

## Diversification Opportunities for First Trust and Vident Core

 0.66 Correlation Coefficient

### Poor diversification

The 3 months correlation between First and Vident is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Vident Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Bond 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 TCW are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Bond has no effect on the direction of First Trust i.e., First Trust and Vident Core go up and down completely randomly.

## Pair Corralation between First Trust and Vident Core

Given the investment horizon of 90 days First Trust TCW is expected to under-perform the Vident Core. In addition to that, First Trust is 1.15 times more volatile than Vident Core Bond. It trades about -0.02 of its total potential returns per unit of risk. Vident Core Bond is currently generating about 0.01 per unit of volatility. If you would invest  4,269  in Vident Core Bond on January 17, 2024 and sell it today you would earn a total of  37.00  from holding Vident Core Bond or generate 0.87% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Significant Accuracy 99.8% Values Daily Returns

## First Trust TCW  vs.  Vident Core Bond

 Performance
 Timeline
 First Trust TCW Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict
 Vident Core Bond Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days Vident Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict

## First Trust and Vident Core Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with First Trust and Vident Core

The main advantage of trading using opposite First Trust and Vident Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vident Core 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 Vident Core will offset losses from the drop in Vident Core's long position.
 First Trust vs. Fidelity Corporate Bond First Trust vs. Fidelity Limited Term First Trust vs. Fidelity High Yield First Trust vs. Fidelity High Dividend
The idea behind First Trust TCW and Vident Core Bond 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.
 Vident Core vs. Fidelity Corporate Bond Vident Core vs. Fidelity Limited Term Vident Core vs. Fidelity High Yield Vident Core vs. Fidelity High Dividend