Correlation Between Vanguard Value and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and First Trust Large, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and First Trust.
Diversification Opportunities for Vanguard Value and First Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and Vanguard Value 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 Value Index 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 Large has no effect on the direction of Vanguard Value i.e., Vanguard Value and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Value and First Trust
Considering the 90-day investment horizon Vanguard Value is expected to generate 1.03 times less return on investment than First Trust. In addition to that, Vanguard Value is 1.01 times more volatile than First Trust Large. It trades about 0.35 of its total potential returns per unit of risk. First Trust Large is currently generating about 0.37 per unit of volatility. If you would invest 10,430 in First Trust Large on November 1, 2024 and sell it today you would earn a total of 540.00 from holding First Trust Large or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. First Trust Large
Performance |
| Timeline |
| Vanguard Value Index |
| First Trust Large |
Vanguard Value and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and First Trust
The main advantage of trading using opposite Vanguard Value and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Mid | 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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