Correlation Between Vanguard FTSE and First Trust
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 Nasdaq, 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
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 Nasdaq 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 Developed is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.88 times less risky than First Trust. The etf trades about -0.14 of its potential returns per unit of risk. The First Trust Nasdaq is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 100,480 in First Trust Nasdaq on August 31, 2024 and sell it today you would earn a total of 7,070 from holding First Trust Nasdaq or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. First Trust Nasdaq
Performance |
| Timeline |
| Vanguard FTSE Developed |
| First Trust Nasdaq |
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.| Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard Global Aggregate | Vanguard FTSE vs. Vanguard USD Corporate | Vanguard FTSE vs. Vanguard FTSE All World |
| First Trust vs. Leverage Shares 3x | First Trust vs. WisdomTree Natural Gas | First Trust vs. GraniteShares 3x Short | First Trust vs. Leverage Shares 3x |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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