Correlation Between Vanguard Consumer and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Consumer 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 Consumer 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 Consumer Discretionary and First Trust Nasdaq, you can compare the effects of market volatilities on Vanguard Consumer 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 Consumer with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Consumer and First Trust.
Diversification Opportunities for Vanguard Consumer and First Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Consumer Discretionar and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Vanguard Consumer 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 Consumer Discretionary 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 Consumer i.e., Vanguard Consumer and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Consumer and First Trust
Considering the 90-day investment horizon Vanguard Consumer Discretionary is expected to generate 0.7 times more return on investment than First Trust. However, Vanguard Consumer Discretionary is 1.43 times less risky than First Trust. It trades about 0.08 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.04 per unit of risk. If you would invest 23,448 in Vanguard Consumer Discretionary on August 24, 2024 and sell it today you would earn a total of 12,820 from holding Vanguard Consumer Discretionary or generate 54.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Consumer Discretionar vs. First Trust Nasdaq
Performance |
| Timeline |
| Vanguard Consumer |
| First Trust Nasdaq |
Vanguard Consumer and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Consumer and First Trust
The main advantage of trading using opposite Vanguard Consumer and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Consumer 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 Consumer vs. Vanguard Consumer Staples | Vanguard Consumer vs. Vanguard Industrials Index | Vanguard Consumer vs. Vanguard Communication Services | Vanguard Consumer vs. Vanguard Materials Index |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. Invesco KBW Regional | First Trust vs. First Trust Nasdaq |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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