Correlation Between First Trust and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Intermediate 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 Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Managed and Vanguard Intermediate Term Tax Exempt, you can compare the effects of market volatilities on First Trust and Vanguard Intermediate 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 Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Intermediate.
Diversification Opportunities for First Trust and Vanguard Intermediate
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and Vanguard Intermediate Term Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Managed are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of First Trust i.e., First Trust and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Intermediate
Assuming the 90 days horizon First Trust is expected to generate 1.03 times less return on investment than Vanguard Intermediate. But when comparing it to its historical volatility, First Trust Managed is 1.02 times less risky than Vanguard Intermediate. It trades about 0.21 of its potential returns per unit of risk. Vanguard Intermediate Term Tax Exempt is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,359 in Vanguard Intermediate Term Tax Exempt on September 2, 2024 and sell it today you would earn a total of 15.00 from holding Vanguard Intermediate Term Tax Exempt or generate 1.1% 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 Managed vs. Vanguard Intermediate Term Tax
Performance |
| Timeline |
| First Trust Managed |
| Vanguard Intermediate |
First Trust and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Intermediate
The main advantage of trading using opposite First Trust and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Intermediate 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 Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| First Trust vs. Franklin Templeton Multi Asset | First Trust vs. First Trust Short | First Trust vs. First Trust Short | First Trust vs. First Trust Short |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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