Correlation Between Vanguard Minimum and First Trust

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

By analyzing existing cross correlation between Vanguard Minimum Volatility and First Trust Dorsey, you can compare the effects of market volatilities on Vanguard Minimum and First Trust 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 Vanguard Minimum with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Minimum and First Trust.

Diversification Opportunities for Vanguard Minimum and First Trust

0.02

Correlation Coefficient

Vanguard Minimum  First Trust

Significant diversification

The 3 months correlation between Vanguard and First is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Minimum Volatility and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and Vanguard Minimum 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 Vanguard Minimum Volatility are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Vanguard Minimum i.e., Vanguard Minimum and First Trust go up and down completely randomly.

Pair Corralation between Vanguard Minimum and First Trust

Given the investment horizon of 90 days Vanguard Minimum Volatility is expected to generate 0.55 times more return on investment than First Trust. However, Vanguard Minimum Volatility is 1.82 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust Dorsey is currently generating about -0.09 per unit of risk. If you would invest  12,125  in Vanguard Minimum Volatility on December 27, 2024 and sell it today you would earn a total of  526.10  from holding Vanguard Minimum Volatility or generate 4.34% return on investment over 90 days.

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

Vanguard Minimum Volatility  vs.  First Trust Dorsey

Vanguard Minimum Vol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Trust Dorsey

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Dorsey has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Vanguard Minimum and First Trust

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

The idea behind Vanguard Minimum Volatility and First Trust Dorsey 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.