Correlation Between First Trust and Vanguard Funds
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Funds 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 Vanguard Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Developed and Vanguard Funds Public, you can compare the effects of market volatilities on First Trust and Vanguard Funds 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 Vanguard Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Funds.
Diversification Opportunities for First Trust and Vanguard Funds
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Vanguard is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Developed and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Developed are associated (or correlated) with Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of First Trust i.e., First Trust and Vanguard Funds go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Funds
Assuming the 90 days trading horizon First Trust Developed is expected to generate 0.53 times more return on investment than Vanguard Funds. However, First Trust Developed is 1.88 times less risky than Vanguard Funds. It trades about 0.22 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about -0.03 per unit of risk. If you would invest 89,577 in First Trust Developed on September 26, 2024 and sell it today you would earn a total of 1,590 from holding First Trust Developed or generate 1.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Developed vs. Vanguard Funds Public
Performance |
Timeline |
First Trust Developed |
Vanguard Funds Public |
First Trust and Vanguard Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and Vanguard Funds
The main advantage of trading using opposite First Trust and Vanguard Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Funds 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 Funds will offset losses from the drop in Vanguard Funds' long position.First Trust vs. Vanguard Index Funds | First Trust vs. Vanguard STAR Funds | First Trust vs. SPDR SP 500 | First Trust vs. iShares Trust |
Vanguard Funds vs. Vanguard Index Funds | Vanguard Funds vs. Vanguard STAR Funds | Vanguard Funds vs. SPDR SP 500 | Vanguard Funds vs. iShares Trust |
Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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