Correlation Between Vanguard Long and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Long 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 Long 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 Long Term Treasury and First Trust Exchange Traded, you can compare the effects of market volatilities on Vanguard Long 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 Long with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and First Trust.
Diversification Opportunities for Vanguard Long and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Treasury and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Vanguard Long 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 Long Term Treasury 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 Exchange has no effect on the direction of Vanguard Long i.e., Vanguard Long and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Long and First Trust
Given the investment horizon of 90 days Vanguard Long Term Treasury is expected to generate 2.14 times more return on investment than First Trust. However, Vanguard Long is 2.14 times more volatile than First Trust Exchange Traded. It trades about 0.05 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.09 per unit of risk. If you would invest 5,177 in Vanguard Long Term Treasury on August 29, 2024 and sell it today you would earn a total of 673.00 from holding Vanguard Long Term Treasury or generate 13.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Long Term Treasury vs. First Trust Exchange Traded
Performance |
| Timeline |
| Vanguard Long Term |
| First Trust Exchange |
Vanguard Long and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Long and First Trust
The main advantage of trading using opposite Vanguard Long and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long 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 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 |
| First Trust vs. iShares MBS ETF | First Trust vs. iShares Core Total | First Trust vs. iShares 3 7 Year | First Trust vs. iShares 10 20 Year |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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