Correlation Between First Trust and Vanguard Specialized
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Specialized 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 Specialized into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Developed and Vanguard Specialized Funds, you can compare the effects of market volatilities on First Trust and Vanguard Specialized 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 Specialized. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Specialized.
Diversification Opportunities for First Trust and Vanguard Specialized
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Vanguard is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Developed and Vanguard Specialized Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Specialized 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 Developed are associated (or correlated) with Vanguard Specialized. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Specialized has no effect on the direction of First Trust i.e., First Trust and Vanguard Specialized go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Specialized
Assuming the 90 days trading horizon First Trust is expected to generate 1.27 times less return on investment than Vanguard Specialized. In addition to that, First Trust is 1.24 times more volatile than Vanguard Specialized Funds. It trades about 0.07 of its total potential returns per unit of risk. Vanguard Specialized Funds is currently generating about 0.11 per unit of volatility. If you would invest 125,160 in Vanguard Specialized Funds on December 7, 2024 and sell it today you would earn a total of 62,840 from holding Vanguard Specialized Funds or generate 50.21% 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 Developed vs. Vanguard Specialized Funds
Performance |
| Timeline |
| First Trust Developed |
| Vanguard Specialized |
First Trust and Vanguard Specialized Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Specialized
The main advantage of trading using opposite First Trust and Vanguard Specialized positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Specialized 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 Specialized will offset losses from the drop in Vanguard Specialized's long position.| First Trust vs. First Trust Germany | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Dow | First Trust vs. First Trust Exchange Traded |
| Vanguard Specialized vs. Vanguard Funds Public | Vanguard Specialized vs. Vanguard World | Vanguard Specialized vs. Vanguard Index Funds | Vanguard Specialized vs. Vanguard Industrials 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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