Correlation Between Van Eck and First Trust

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

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

Diversification Opportunities for Van Eck and First Trust

-0.45

Correlation Coefficient

Van Eck  First Trust

Very good diversification

The 3 months correlation between Van and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Van Eck 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 Van Eck 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 Van Eck 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 Van Eck i.e., Van Eck and First Trust go up and down completely randomly.

Pair Corralation between Van Eck and First Trust

Considering the 90-day investment horizon Van Eck is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Van Eck is 2.16 times less risky than First Trust. The etf trades about -0.01 of its potential returns per unit of risk. The First Trust Emerging is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,744  in First Trust Emerging on May 2, 2025 and sell it today you would earn a total of  86.00  from holding First Trust Emerging or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.74%
Values	Daily Returns

Van Eck  vs.  First Trust Emerging

Van Eck

Risk-Adjusted Performance

Very Weak

Over the last 90 days Van Eck has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Van Eck is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Emerging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Van Eck and First Trust

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

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.