Correlation Between First Trust and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard FTSE 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 FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and Vanguard FTSE Developed, you can compare the effects of market volatilities on First Trust and Vanguard FTSE 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 FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard FTSE.
Diversification Opportunities for First Trust and Vanguard FTSE
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed 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 Japan are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of First Trust i.e., First Trust and Vanguard FTSE go up and down completely randomly.
Pair Corralation between First Trust and Vanguard FTSE
Considering the 90-day investment horizon First Trust is expected to generate 1.95 times less return on investment than Vanguard FTSE. In addition to that, First Trust is 1.46 times more volatile than Vanguard FTSE Developed. It trades about 0.05 of its total potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.13 per unit of volatility. If you would invest 4,749 in Vanguard FTSE Developed on February 12, 2024 and sell it today you would earn a total of 287.00 from holding Vanguard FTSE Developed or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
First Trust Japan vs. Vanguard FTSE Developed
Performance |
| Timeline |
| First Trust Japan |
| Vanguard FTSE Developed |
First Trust and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard FTSE
The main advantage of trading using opposite First Trust and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.| First Trust vs. JPMorgan BetaBuilders Developed | First Trust vs. JPMorgan BetaBuilders Europe | First Trust vs. JPMorgan BetaBuilders Canada | First Trust vs. Six Circles Unconstrained |
| Vanguard FTSE vs. iShares MSCI Intl | Vanguard FTSE vs. iShares Edge MSCI | Vanguard FTSE vs. iShares MSCI Emerging | Vanguard FTSE vs. iShares MSCI USA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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