Correlation Between Vanguard Utilities and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Utilities 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 Utilities 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 Utilities Index and First Trust EIP, you can compare the effects of market volatilities on Vanguard Utilities 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 Utilities with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Utilities and First Trust.
Diversification Opportunities for Vanguard Utilities and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Utilities Index and First Trust EIP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust EIP and Vanguard Utilities 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 Utilities 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 EIP has no effect on the direction of Vanguard Utilities i.e., Vanguard Utilities and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Utilities and First Trust
Considering the 90-day investment horizon Vanguard Utilities Index is expected to generate 1.07 times more return on investment than First Trust. However, Vanguard Utilities is 1.07 times more volatile than First Trust EIP. It trades about 0.06 of its potential returns per unit of risk. First Trust EIP is currently generating about 0.06 per unit of risk. If you would invest 16,957 in Vanguard Utilities Index on March 14, 2025 and sell it today you would earn a total of 676.00 from holding Vanguard Utilities Index or generate 3.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Utilities Index vs. First Trust EIP
Performance |
| Timeline |
| Vanguard Utilities Index |
| First Trust EIP |
Vanguard Utilities and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Utilities and First Trust
The main advantage of trading using opposite Vanguard Utilities and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Utilities 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 Utilities vs. Vanguard Consumer Staples | Vanguard Utilities vs. Vanguard Materials Index | Vanguard Utilities vs. Vanguard Communication Services | Vanguard Utilities vs. Vanguard Financials Index |
| First Trust vs. Change Finance Diversified | First Trust vs. Amplify ETF Trust | First Trust vs. Virtus Reaves Utilities | First Trust vs. First Trust Utilities |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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