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 RiverFront 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
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust RiverFront 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 RiverFront 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
Given the investment horizon of 90 days First Trust RiverFront is expected to generate 0.99 times more return on investment than Vanguard FTSE. However, First Trust RiverFront is 1.01 times less risky than Vanguard FTSE. It trades about -0.09 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.12 per unit of risk. If you would invest 6,376 in First Trust RiverFront on January 25, 2024 and sell it today you would lose (95.00) from holding First Trust RiverFront or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Trust RiverFront vs. Vanguard FTSE Developed
Performance |
| Timeline |
| First Trust RiverFront |
| 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. SPDR MSCI Emerging | First Trust vs. SPDR MSCI USA | First Trust vs. SPDR MSCI World | First Trust vs. SPDR SSGA Large |
| Vanguard FTSE vs. SPDR MSCI Emerging | Vanguard FTSE vs. SPDR MSCI USA | Vanguard FTSE vs. SPDR MSCI World | Vanguard FTSE vs. SPDR SSGA Large |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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