Correlation Between VictoryShares and First Trust

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

Diversification Opportunities for VictoryShares and First Trust

-0.02

Correlation Coefficient

VictoryShares  First Trust

Good diversification

The 3 months correlation between VictoryShares and First is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares and First Trust Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Small and VictoryShares 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 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 Small has no effect on the direction of VictoryShares i.e., VictoryShares and First Trust go up and down completely randomly.

Pair Corralation between VictoryShares and First Trust

Considering the 90-day investment horizon VictoryShares is expected to generate 414.62 times more return on investment than First Trust. However, VictoryShares is 414.62 times more volatile than First Trust Small. It trades about 0.38 of its potential returns per unit of risk. First Trust Small is currently generating about 0.74 per unit of risk. If you would invest  20.00  in VictoryShares on April 22, 2025 and sell it today you would earn a total of  5,083  from holding VictoryShares or generate 25415.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

VictoryShares  vs.  First Trust Small

VictoryShares

Risk-Adjusted Performance

Strong

Over the last 90 days VictoryShares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating basic indicators, VictoryShares reported solid returns over the last few months and may actually be approaching a breakup point.

First Trust Small

Risk-Adjusted Performance

Market Crasher

Over the last 90 days First Trust Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, First Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VictoryShares and First Trust

The main advantage of trading using opposite VictoryShares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares 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 VictoryShares and First Trust Small 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.