Correlation Between Vanguard Value and FT Vest

Can any of the company-specific risk be diversified away by investing in both Vanguard Value and FT Vest 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 Value and FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Value Index and FT Vest Equity, you can compare the effects of market volatilities on Vanguard Value and FT Vest 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 Value with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and FT Vest.

Diversification Opportunities for Vanguard Value and FT Vest

-0.1

Correlation Coefficient

Vanguard Value  FT Vest

Good diversification

The 3 months correlation between Vanguard and DHDG is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and Vanguard Value 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 Value Index are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Vanguard Value i.e., Vanguard Value and FT Vest go up and down completely randomly.

Pair Corralation between Vanguard Value and FT Vest

Considering the 90-day investment horizon Vanguard Value Index is expected to generate 1.68 times more return on investment than FT Vest. However, Vanguard Value is 1.68 times more volatile than FT Vest Equity. It trades about 0.15 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.18 per unit of risk. If you would invest  16,996  in Vanguard Value Index on September 4, 2024 and sell it today you would earn a total of  1,070  from holding Vanguard Value Index or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.44%
Values	Daily Returns

Vanguard Value Index  vs.  FT Vest Equity

Vanguard Value Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Value and FT Vest

The main advantage of trading using opposite Vanguard Value and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, FT Vest 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 FT Vest will offset losses from the drop in FT Vest's long position.

The idea behind Vanguard Value Index and FT Vest Equity 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.