Correlation Between First Trust and AdvisorShares Vice

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

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

Diversification Opportunities for First Trust and AdvisorShares Vice

0.92

Correlation Coefficient

First Trust  AdvisorShares Vice

Almost no diversification

The 3 months correlation between First and AdvisorShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and AdvisorShares Vice ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Vice ETF 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 NASDAQ are associated (or correlated) with AdvisorShares Vice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Vice ETF has no effect on the direction of First Trust i.e., First Trust and AdvisorShares Vice go up and down completely randomly.

Pair Corralation between First Trust and AdvisorShares Vice

Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the AdvisorShares Vice. In addition to that, First Trust is 2.23 times more volatile than AdvisorShares Vice ETF. It trades about -0.03 of its total potential returns per unit of risk. AdvisorShares Vice ETF is currently generating about 0.04 per unit of volatility. If you would invest  2,722  in AdvisorShares Vice ETF on February 9, 2025 and sell it today you would earn a total of  499.00  from holding AdvisorShares Vice ETF or generate 18.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

First Trust NASDAQ  vs.  AdvisorShares Vice ETF

First Trust NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

AdvisorShares Vice ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvisorShares Vice ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, AdvisorShares Vice is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and AdvisorShares Vice

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

The idea behind First Trust NASDAQ and AdvisorShares Vice ETF 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.