Correlation Between Vanguard Mid and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Mid 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 Mid Cap Growth and First Trust Multi, you can compare the effects of market volatilities on Vanguard Mid 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 Mid with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and First Trust.
Diversification Opportunities for Vanguard Mid and First Trust
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and First is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Growth and First Trust Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and Vanguard Mid 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 Mid Cap Growth 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 Multi has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Mid and First Trust
Considering the 90-day investment horizon Vanguard Mid is expected to generate 1.1 times less return on investment than First Trust. But when comparing it to its historical volatility, Vanguard Mid Cap Growth is 1.13 times less risky than First Trust. It trades about 0.31 of its potential returns per unit of risk. First Trust Multi is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 13,528 in First Trust Multi on August 24, 2024 and sell it today you would earn a total of 1,107 from holding First Trust Multi or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Growth vs. First Trust Multi
Performance |
| Timeline |
| Vanguard Mid Cap |
| First Trust Multi |
Vanguard Mid and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and First Trust
The main advantage of trading using opposite Vanguard Mid and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid vs. Vanguard Small Cap Growth | Vanguard Mid vs. Vanguard Mid Cap Value | Vanguard Mid vs. Vanguard Small Cap Value | Vanguard Mid vs. Vanguard Mid Cap Index |
| First Trust vs. First Trust Multi | First Trust vs. First Trust Small | 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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