Correlation Between Vanguard Extended and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended 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 Extended 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 Extended Market and First Trust SMID, you can compare the effects of market volatilities on Vanguard Extended 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 Extended with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and First Trust.
Diversification Opportunities for Vanguard Extended 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 Extended Market and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID and Vanguard Extended 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 Extended Market 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 SMID has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Extended and First Trust
Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.14 times more return on investment than First Trust. However, Vanguard Extended is 1.14 times more volatile than First Trust SMID. It trades about 0.08 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.08 per unit of risk. If you would invest 13,274 in Vanguard Extended Market on August 28, 2024 and sell it today you would earn a total of 7,330 from holding Vanguard Extended Market or generate 55.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Market vs. First Trust SMID
Performance |
| Timeline |
| Vanguard Extended Market |
| First Trust SMID |
Vanguard Extended and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and First Trust
The main advantage of trading using opposite Vanguard Extended and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended 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 Extended vs. Vanguard Mid Cap Index | Vanguard Extended vs. iShares Core SP | Vanguard Extended vs. SPDR SP MIDCAP | Vanguard Extended vs. First Trust Dorsey |
| First Trust vs. Vanguard Mid Cap Index | First Trust vs. iShares Core SP | First Trust vs. SPDR SP MIDCAP | First Trust vs. First Trust Dorsey |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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