Correlation Between Vanguard FTSE and FIRST TRUST

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Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Developed and FIRST TRUST GLOBAL, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of FIRST TRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and FIRST TRUST.

Diversification Opportunities for Vanguard FTSE and FIRST TRUST

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Vanguard and FIRST is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and FIRST TRUST GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST TRUST GLOBAL and Vanguard FTSE 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 FTSE Developed 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 GLOBAL has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and FIRST TRUST go up and down completely randomly.

Pair Corralation between Vanguard FTSE and FIRST TRUST

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.82 times less return on investment than FIRST TRUST. In addition to that, Vanguard FTSE is 1.59 times more volatile than FIRST TRUST GLOBAL. It trades about 0.03 of its total potential returns per unit of risk. FIRST TRUST GLOBAL is currently generating about 0.08 per unit of volatility. If you would invest  263,425  in FIRST TRUST GLOBAL on September 25, 2024 and sell it today you would earn a total of  49,075  from holding FIRST TRUST GLOBAL or generate 18.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.76%
ValuesDaily Returns

Vanguard FTSE Developed  vs.  FIRST TRUST GLOBAL

 Performance 
       Timeline  
Vanguard FTSE Developed 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.
FIRST TRUST GLOBAL 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in FIRST TRUST GLOBAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, FIRST TRUST is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE and FIRST TRUST Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard FTSE and FIRST TRUST

The main advantage of trading using opposite Vanguard FTSE and FIRST TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE Developed and FIRST TRUST GLOBAL 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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