Correlation Between First Trust and Vanguard Real

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

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

Diversification Opportunities for First Trust and Vanguard Real

0.45

Correlation Coefficient

First Trust  Vanguard Real

Very weak diversification

The 3 months correlation between First and Vanguard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Capital and Vanguard Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Real Estate 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 Capital are associated (or correlated) with Vanguard Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Real Estate has no effect on the direction of First Trust i.e., First Trust and Vanguard Real go up and down completely randomly.

Pair Corralation between First Trust and Vanguard Real

Given the investment horizon of 90 days First Trust Capital is expected to generate 0.55 times more return on investment than Vanguard Real. However, First Trust Capital is 1.83 times less risky than Vanguard Real. It trades about 0.06 of its potential returns per unit of risk. Vanguard Real Estate is currently generating about 0.03 per unit of risk. If you would invest  7,281  in First Trust Capital on September 20, 2024 and sell it today you would earn a total of  1,481  from holding First Trust Capital or generate 20.34% return on investment over 90 days.

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

First Trust Capital  vs.  Vanguard Real Estate

First Trust Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with First Trust and Vanguard Real

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

The idea behind First Trust Capital and Vanguard Real Estate 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.