Correlation Between Vanguard Short and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Short 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 Short 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 Short Term Treasury and First Trust Exchange Traded, you can compare the effects of market volatilities on Vanguard Short 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 Short with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and First Trust.
Diversification Opportunities for Vanguard Short and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short 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 Short 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 Short 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 Short i.e., Vanguard Short and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Short and First Trust
Given the investment horizon of 90 days Vanguard Short is expected to generate 1.76 times less return on investment than First Trust. But when comparing it to its historical volatility, Vanguard Short Term Treasury is 3.59 times less risky than First Trust. It trades about 0.17 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,816 in First Trust Exchange Traded on August 29, 2024 and sell it today you would earn a total of 200.00 from holding First Trust Exchange Traded or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Treasury vs. First Trust Exchange Traded
Performance |
| Timeline |
| Vanguard Short Term |
| First Trust Exchange |
Vanguard Short and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short and First Trust
The main advantage of trading using opposite Vanguard Short and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short 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.The idea behind Vanguard Short Term Treasury and First Trust Exchange Traded pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |