Correlation Between Vanguard Mega and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Mega and First Trust 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 Vanguard Mega and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mega Cap and First Trust NASDAQ 100, you can compare the effects of market volatilities on Vanguard Mega and First Trust 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 Vanguard Mega with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mega and First Trust.
Diversification Opportunities for Vanguard Mega and First Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and First Trust NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and Vanguard Mega 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 Vanguard Mega Cap are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Mega and First Trust
Considering the 90-day investment horizon Vanguard Mega Cap is expected to generate 1.42 times more return on investment than First Trust. However, Vanguard Mega is 1.42 times more volatile than First Trust NASDAQ 100. It trades about 0.11 of its potential returns per unit of risk. First Trust NASDAQ 100 is currently generating about 0.08 per unit of risk. If you would invest 22,361 in Vanguard Mega Cap on September 1, 2024 and sell it today you would earn a total of 11,641 from holding Vanguard Mega Cap or generate 52.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard Mega Cap vs. First Trust NASDAQ 100
Performance |
| Timeline |
| Vanguard Mega Cap |
| First Trust NASDAQ |
Vanguard Mega and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mega and First Trust
The main advantage of trading using opposite Vanguard Mega and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mega position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Vanguard Mega vs. Vanguard Mega Cap | Vanguard Mega vs. Vanguard Mid Cap Growth | Vanguard Mega vs. Vanguard Growth Index | Vanguard Mega vs. Vanguard Small Cap Growth |
| First Trust vs. First Trust NASDAQ 100 | First Trust vs. First Trust Multi | First Trust vs. First Trust Large | First Trust vs. First Trust Large |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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