Correlation Between First Trust and Vanguard Long
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Long 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 Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust TCW and Vanguard Long Term Treasury, you can compare the effects of market volatilities on First Trust and Vanguard Long 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 Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Long.
Diversification Opportunities for First Trust and Vanguard Long
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Vanguard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and Vanguard Long Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term 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 TCW are associated (or correlated) with Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of First Trust i.e., First Trust and Vanguard Long go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Long
Given the investment horizon of 90 days First Trust TCW is expected to generate 1.68 times more return on investment than Vanguard Long. However, First Trust is 1.68 times more volatile than Vanguard Long Term Treasury. It trades about 0.2 of its potential returns per unit of risk. Vanguard Long Term Treasury is currently generating about -0.07 per unit of risk. If you would invest 1,598 in First Trust TCW on October 26, 2024 and sell it today you would earn a total of 62.00 from holding First Trust TCW or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust TCW vs. Vanguard Long Term Treasury
Performance |
| Timeline |
| First Trust TCW |
| Vanguard Long Term |
First Trust and Vanguard Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Long
The main advantage of trading using opposite First Trust and Vanguard Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Long 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 Long will offset losses from the drop in Vanguard Long's long position.| First Trust vs. First Trust TCW | First Trust vs. SPDR Bloomberg Barclays | First Trust vs. First Trust Short | First Trust vs. First Trust Emerging |
| Vanguard Long vs. Vanguard Intermediate Term Treasury | Vanguard Long vs. Vanguard Short Term Treasury | Vanguard Long vs. Vanguard Long Term Corporate | Vanguard Long vs. Vanguard Extended Duration |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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