Correlation Between Vanguard Bond and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Bond 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 Bond 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 Bond Index and First Trust FTSE, you can compare the effects of market volatilities on Vanguard Bond 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 Bond with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Bond and First Trust.
Diversification Opportunities for Vanguard Bond and First Trust
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Bond Index and First Trust FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust FTSE and Vanguard Bond 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 Bond Index 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 FTSE has no effect on the direction of Vanguard Bond i.e., Vanguard Bond and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Bond and First Trust
Assuming the 90 days trading horizon Vanguard Bond Index is expected to generate 10.57 times more return on investment than First Trust. However, Vanguard Bond is 10.57 times more volatile than First Trust FTSE. It trades about 0.05 of its potential returns per unit of risk. First Trust FTSE is currently generating about -0.04 per unit of risk. If you would invest 121,086 in Vanguard Bond Index on August 27, 2024 and sell it today you would earn a total of 26,064 from holding Vanguard Bond Index or generate 21.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.0% |
| Values | Daily Returns |
Vanguard Bond Index vs. First Trust FTSE
Performance |
| Timeline |
| Vanguard Bond Index |
| First Trust FTSE |
Vanguard Bond and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Bond and First Trust
The main advantage of trading using opposite Vanguard Bond and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Bond 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.| Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. Vanguard Tax Managed Funds | Vanguard Bond vs. Vanguard International Equity |
| First Trust vs. First Trust Developed | First Trust vs. First Trust Germany | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Dow |
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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