Correlation Between VanEck Agribusiness and First Trust

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

By analyzing existing cross correlation between VanEck Agribusiness ETF and First Trust Water, you can compare the effects of market volatilities on VanEck Agribusiness 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 VanEck Agribusiness with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Agribusiness and First Trust.

Diversification Opportunities for VanEck Agribusiness and First Trust

0.62

Correlation Coefficient

VanEck Agribusiness  First Trust

Poor diversification

The 3 months correlation between VanEck and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and First Trust Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Water and VanEck Agribusiness 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 VanEck Agribusiness ETF 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 Water has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and First Trust go up and down completely randomly.

Pair Corralation between VanEck Agribusiness and First Trust

Considering the 90-day investment horizon VanEck Agribusiness ETF is expected to under-perform the First Trust. In addition to that, VanEck Agribusiness is 1.06 times more volatile than First Trust Water. It trades about -0.12 of its total potential returns per unit of risk. First Trust Water is currently generating about 0.12 per unit of volatility. If you would invest  10,118  in First Trust Water on February 7, 2024 and sell it today you would earn a total of  245.00  from holding First Trust Water or generate 2.42% return on investment over 90 days.

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

VanEck Agribusiness ETF  vs.  First Trust Water

VanEck Agribusiness ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Agribusiness ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck Agribusiness is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Trust Water

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Water are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with VanEck Agribusiness and First Trust

The main advantage of trading using opposite VanEck Agribusiness and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Agribusiness 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.

The idea behind VanEck Agribusiness ETF and First Trust Water 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.