Correlation Between First Trust and Vanguard Dividend
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Dividend 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 Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and Vanguard Dividend Appreciation, you can compare the effects of market volatilities on First Trust and Vanguard Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Dividend.
Diversification Opportunities for First Trust and Vanguard Dividend
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend 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 Value are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of First Trust i.e., First Trust and Vanguard Dividend go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Dividend
Considering the 90-day investment horizon First Trust Value is expected to generate 1.1 times more return on investment than Vanguard Dividend. However, First Trust is 1.1 times more volatile than Vanguard Dividend Appreciation. It trades about -0.05 of its potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about -0.12 per unit of risk. If you would invest 4,139 in First Trust Value on January 26, 2024 and sell it today you would lose (35.00) from holding First Trust Value or give up 0.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Value vs. Vanguard Dividend Appreciation
Performance |
| Timeline |
| First Trust Value |
| Vanguard Dividend |
First Trust and Vanguard Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Dividend
The main advantage of trading using opposite First Trust and Vanguard Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Dividend 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 Dividend will offset losses from the drop in Vanguard Dividend's long position.| First Trust vs. Hartford Multifactor Emerging | First Trust vs. Hartford Multifactor Developed | First Trust vs. iShares Equity Factor | First Trust vs. SPDR MSCI USA |
| Vanguard Dividend vs. SPDR MSCI EAFE | Vanguard Dividend vs. SPDR MSCI Emerging | Vanguard Dividend vs. SPDR Russell 1000 | Vanguard Dividend vs. SPDR Russell 1000 |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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