Correlation Between Vanguard Intermediate and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate 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 Intermediate 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 Intermediate Term Tax Exempt and First Trust Managed, you can compare the effects of market volatilities on Vanguard Intermediate 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 Intermediate with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and First Trust.
Diversification Opportunities for Vanguard Intermediate and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tax and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Vanguard Intermediate 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 Intermediate Term Tax Exempt 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 Managed has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and First Trust
Assuming the 90 days horizon Vanguard Intermediate is expected to generate 1.18 times less return on investment than First Trust. But when comparing it to its historical volatility, Vanguard Intermediate Term Tax Exempt is 1.04 times less risky than First Trust. It trades about 0.09 of its potential returns per unit of risk. First Trust Managed is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,916 in First Trust Managed on August 31, 2024 and sell it today you would earn a total of 148.00 from holding First Trust Managed or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Vanguard Intermediate Term Tax vs. First Trust Managed
Performance |
| Timeline |
| Vanguard Intermediate |
| First Trust Managed |
Vanguard Intermediate and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and First Trust
The main advantage of trading using opposite Vanguard Intermediate and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate 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 Intermediate Term Tax Exempt and First Trust Managed 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.
| First Trust vs. Vanguard Intermediate Term Tax Exempt | First Trust vs. Tax Exempt Bond | First Trust vs. Blackrock National Municipal | First Trust vs. HUMANA INC |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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