Correlation Between FT AlphaDEX and Vanguard

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

By analyzing existing cross correlation between FT AlphaDEX Industrials and Vanguard SP 500, you can compare the effects of market volatilities on FT AlphaDEX and Vanguard 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 AlphaDEX with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and Vanguard.

Diversification Opportunities for FT AlphaDEX and Vanguard

0.85

Correlation Coefficient

FT AlphaDEX  Vanguard

Very poor diversification

The 3 months correlation between FHG and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and FT AlphaDEX 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 AlphaDEX Industrials are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and Vanguard go up and down completely randomly.

Pair Corralation between FT AlphaDEX and Vanguard

Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 1.1 times more return on investment than Vanguard. However, FT AlphaDEX is 1.1 times more volatile than Vanguard SP 500. It trades about -0.07 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.09 per unit of risk. If you would invest  5,646  in FT AlphaDEX Industrials on December 29, 2024 and sell it today you would lose (295.00) from holding FT AlphaDEX Industrials or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

FT AlphaDEX Industrials  vs.  Vanguard SP 500

FT AlphaDEX Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT AlphaDEX Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, FT AlphaDEX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT AlphaDEX and Vanguard

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

The idea behind FT AlphaDEX Industrials and Vanguard SP 500 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.