Correlation Between First Trust and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Total 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 Total 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 Total Stock, you can compare the effects of market volatilities on First Trust and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Total.
Diversification Opportunities for First Trust and Vanguard Total
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Developed and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of First Trust i.e., First Trust and Vanguard Total go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Total
Considering the 90-day investment horizon First Trust is expected to generate 1.15 times less return on investment than Vanguard Total. In addition to that, First Trust is 1.0 times more volatile than Vanguard Total Stock. It trades about 0.17 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.19 per unit of volatility. If you would invest 20,944 in Vanguard Total Stock on January 17, 2024 and sell it today you would earn a total of 4,045 from holding Vanguard Total Stock or generate 19.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Developed vs. Vanguard Total Stock
Performance |
| Timeline |
| First Trust Developed |
| Vanguard Total Stock |
First Trust and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Total
The main advantage of trading using opposite First Trust and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| First Trust vs. Invesco SP SmallCap | First Trust vs. iShares MSCI Europe | First Trust vs. HUMANA INC | First Trust vs. Morningstar Unconstrained Allocation |
| Vanguard Total vs. Natixis ETF Trust | Vanguard Total vs. HUMANA INC | Vanguard Total vs. Sparta Capital | Vanguard Total vs. T Rowe Price |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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