Correlation Between VanEck China and First Trust

Can any of the company-specific risk be diversified away by investing in both VanEck China 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 China 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 China Bond and First Trust Emerging, you can compare the effects of market volatilities on VanEck China 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 China with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck China and First Trust.

Diversification Opportunities for VanEck China and First Trust

0.91

Correlation Coefficient

VanEck China  First Trust

Almost no diversification

The 3 months correlation between VanEck and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding VanEck China Bond and First Trust Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Emerging and VanEck China 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 China Bond 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 Emerging has no effect on the direction of VanEck China i.e., VanEck China and First Trust go up and down completely randomly.

Pair Corralation between VanEck China and First Trust

Given the investment horizon of 90 days VanEck China is expected to generate 3.15 times less return on investment than First Trust. But when comparing it to its historical volatility, VanEck China Bond is 2.21 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Emerging is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,665  in First Trust Emerging on March 26, 2025 and sell it today you would earn a total of  175.00  from holding First Trust Emerging or generate 6.57% return on investment over 90 days.

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

VanEck China Bond  vs.  First Trust Emerging

VanEck China Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck China Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VanEck China is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First Trust Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Emerging are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with VanEck China and First Trust

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

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.