Correlation Between Vanguard Global and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Global 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 Global 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 Global ex US and First Trust Exchange Traded, you can compare the effects of market volatilities on Vanguard Global 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 Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and First Trust.
Diversification Opportunities for Vanguard Global and First Trust
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global ex US 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 Global 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 Global ex US 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 Global i.e., Vanguard Global and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Global and First Trust
Given the investment horizon of 90 days Vanguard Global ex US is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Global ex US is 1.36 times less risky than First Trust. The etf trades about -0.06 of its potential returns per unit of risk. The First Trust Exchange Traded is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,772 in First Trust Exchange Traded on October 25, 2024 and sell it today you would earn a total of 62.00 from holding First Trust Exchange Traded or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Global ex US vs. First Trust Exchange Traded
Performance |
| Timeline |
| Vanguard Global ex |
| First Trust Exchange |
Vanguard Global and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and First Trust
The main advantage of trading using opposite Vanguard Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global 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 Global vs. Vanguard FTSE All World | Vanguard Global vs. Vanguard Real Estate | Vanguard Global vs. Vanguard Total International | Vanguard Global vs. Schwab REIT ETF |
| First Trust vs. FlexShares Global Quality | First Trust vs. ALPS REIT Dividend | First Trust vs. WisdomTree New Economy | First Trust vs. First Trust RBA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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