Correlation Between Virtus Newfleet and First Trust

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

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

Diversification Opportunities for Virtus Newfleet and First Trust

-0.4

Correlation Coefficient

Virtus Newfleet  First Trust

Very good diversification

The 3 months correlation between Virtus and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Newfleet ABSMBS 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 Virtus Newfleet 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 Virtus Newfleet ABSMBS 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 Virtus Newfleet i.e., Virtus Newfleet and First Trust go up and down completely randomly.

Pair Corralation between Virtus Newfleet and First Trust

Given the investment horizon of 90 days Virtus Newfleet is expected to generate 14.25 times less return on investment than First Trust. But when comparing it to its historical volatility, Virtus Newfleet ABSMBS is 5.82 times less risky than First Trust. It trades about 0.21 of its potential returns per unit of risk. First Trust Small is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  2,731  in First Trust Small on April 24, 2025 and sell it today you would earn a total of  96.00  from holding First Trust Small or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	13.11%
Values	Daily Returns

Virtus Newfleet ABSMBS  vs.  First Trust Small

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Small

Risk-Adjusted Performance

Very Strong

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 Virtus Newfleet and First Trust

The main advantage of trading using opposite Virtus Newfleet and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Newfleet 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 Virtus Newfleet ABSMBS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.