Correlation Between FT Vest and Vanguard Mid

Can any of the company-specific risk be diversified away by investing in both FT Vest and Vanguard Mid 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 FT Vest and Vanguard Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest Equity and Vanguard Mid Cap Index, you can compare the effects of market volatilities on FT Vest and Vanguard Mid 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 FT Vest with a short position of Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and Vanguard Mid.

Diversification Opportunities for FT Vest and Vanguard Mid

-0.25

Correlation Coefficient

FT Vest  Vanguard Mid

Very good diversification

The 3 months correlation between DHDG and Vanguard is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and FT Vest 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 FT Vest Equity are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of FT Vest i.e., FT Vest and Vanguard Mid go up and down completely randomly.

Pair Corralation between FT Vest and Vanguard Mid

Given the investment horizon of 90 days FT Vest is expected to generate 2.7 times less return on investment than Vanguard Mid. But when comparing it to its historical volatility, FT Vest Equity is 1.75 times less risky than Vanguard Mid. It trades about 0.18 of its potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  25,203  in Vanguard Mid Cap Index on September 2, 2024 and sell it today you would earn a total of  3,260  from holding Vanguard Mid Cap Index or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.88%
Values	Daily Returns

FT Vest Equity  vs.  Vanguard Mid Cap Index

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FT Vest and Vanguard Mid

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

The idea behind FT Vest Equity and Vanguard Mid Cap Index 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.