Correlation Between First Trust and VanEck Inflation

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

By analyzing existing cross correlation between First Trust Financials and VanEck Inflation Allocation, you can compare the effects of market volatilities on First Trust and VanEck Inflation 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 VanEck Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and VanEck Inflation.

Diversification Opportunities for First Trust and VanEck Inflation

0.67

Correlation Coefficient

First Trust  VanEck Inflation

Poor diversification

The 3 months correlation between First and VanEck is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Financials and VanEck Inflation Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Inflation All 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 Financials are associated (or correlated) with VanEck Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Inflation All has no effect on the direction of First Trust i.e., First Trust and VanEck Inflation go up and down completely randomly.

Pair Corralation between First Trust and VanEck Inflation

Considering the 90-day investment horizon First Trust Financials is expected to generate 1.74 times more return on investment than VanEck Inflation. However, First Trust is 1.74 times more volatile than VanEck Inflation Allocation. It trades about 0.12 of its potential returns per unit of risk. VanEck Inflation Allocation is currently generating about 0.16 per unit of risk. If you would invest  5,189  in First Trust Financials on May 5, 2025 and sell it today you would earn a total of  392.00  from holding First Trust Financials or generate 7.55% return on investment over 90 days.

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

First Trust Financials  vs.  VanEck Inflation Allocation

First Trust Financials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Financials are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

VanEck Inflation All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Inflation Allocation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, VanEck Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and VanEck Inflation

The main advantage of trading using opposite First Trust and VanEck Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, VanEck Inflation 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 VanEck Inflation will offset losses from the drop in VanEck Inflation's long position.

The idea behind First Trust Financials and VanEck Inflation Allocation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.