Correlation Between First Trust and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Vanguard Global ex US, you can compare the effects of market volatilities on First Trust and Vanguard Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Global.
Diversification Opportunities for First Trust and Vanguard Global
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Vanguard Global ex US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global ex 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 Exchange Traded are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global ex has no effect on the direction of First Trust i.e., First Trust and Vanguard Global go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Global
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 1.36 times more return on investment than Vanguard Global. However, First Trust is 1.36 times more volatile than Vanguard Global ex US. It trades about 0.08 of its potential returns per unit of risk. Vanguard Global ex US is currently generating about -0.06 per unit of risk. If you would invest 3,772 in First Trust Exchange Traded on October 25, 2024 and sell it today you would earn a total of 62.00 from holding First Trust Exchange Traded or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Vanguard Global ex US
Performance |
| Timeline |
| First Trust Exchange |
| Vanguard Global ex |
First Trust and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Global
The main advantage of trading using opposite First Trust and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Global 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 Global will offset losses from the drop in Vanguard Global's long position.| First Trust vs. FlexShares Global Quality | First Trust vs. ALPS REIT Dividend | First Trust vs. WisdomTree New Economy | First Trust vs. First Trust RBA |
| Vanguard Global vs. Vanguard FTSE All World | Vanguard Global vs. Vanguard Real Estate | Vanguard Global vs. Vanguard Total International | Vanguard Global vs. Schwab REIT ETF |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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