Correlation Between Vanguard Large and First Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Large 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 Large 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 Large Cap Index and First Trust Active, you can compare the effects of market volatilities on Vanguard Large 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 Large with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and First Trust.
Diversification Opportunities for Vanguard Large and First Trust
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and First is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and First Trust Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Active and Vanguard Large 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 Large Cap 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 Active has no effect on the direction of Vanguard Large i.e., Vanguard Large and First Trust go up and down completely randomly.
Pair Corralation between Vanguard Large and First Trust
Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.09 times more return on investment than First Trust. However, Vanguard Large is 1.09 times more volatile than First Trust Active. It trades about 0.09 of its potential returns per unit of risk. First Trust Active is currently generating about 0.08 per unit of risk. If you would invest 25,246 in Vanguard Large Cap Index on March 13, 2025 and sell it today you would earn a total of 2,576 from holding Vanguard Large Cap Index or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. First Trust Active
Performance |
| Timeline |
| Vanguard Large Cap |
| First Trust Active |
Vanguard Large and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and First Trust
The main advantage of trading using opposite Vanguard Large and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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 Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| First Trust vs. First Trust Active | First Trust vs. Absolute Core Strategy | First Trust vs. Anfield Equity Sector | First Trust vs. Global X Adaptive |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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