Correlation Between First Trust and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both First Trust and Vanguard Extended 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 Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Vanguard Extended Market, you can compare the effects of market volatilities on First Trust and Vanguard Extended 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 Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Vanguard Extended.
Diversification Opportunities for First Trust and Vanguard Extended
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market 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 Dorsey are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of First Trust i.e., First Trust and Vanguard Extended go up and down completely randomly.
Pair Corralation between First Trust and Vanguard Extended
Allowing for the 90-day total investment horizon First Trust is expected to generate 2.24 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, First Trust Dorsey is 1.14 times less risky than Vanguard Extended. It trades about 0.16 of its potential returns per unit of risk. Vanguard Extended Market is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 18,567 in Vanguard Extended Market on August 27, 2024 and sell it today you would earn a total of 1,775 from holding Vanguard Extended Market or generate 9.56% 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 Dorsey vs. Vanguard Extended Market
Performance |
| Timeline |
| First Trust Dorsey |
| Vanguard Extended Market |
First Trust and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Vanguard Extended
The main advantage of trading using opposite First Trust and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| Vanguard Extended vs. Vanguard Mid Cap Index | Vanguard Extended vs. iShares Core SP | Vanguard Extended vs. SPDR SP MIDCAP | Vanguard Extended vs. First Trust Dorsey |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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