Correlation Between Vanguard Real and First Trust

Can any of the company-specific risk be diversified away by investing in both Vanguard Real 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 Real 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 Real Estate and First Trust Income, you can compare the effects of market volatilities on Vanguard Real 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 Real with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Real and First Trust.

Diversification Opportunities for Vanguard Real and First Trust

0.79

Correlation Coefficient

Vanguard Real  First Trust

Poor diversification

The 3 months correlation between Vanguard and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and First Trust Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Income and Vanguard Real 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 Real Estate 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 Income has no effect on the direction of Vanguard Real i.e., Vanguard Real and First Trust go up and down completely randomly.

Pair Corralation between Vanguard Real and First Trust

Considering the 90-day investment horizon Vanguard Real is expected to generate 10.51 times less return on investment than First Trust. In addition to that, Vanguard Real is 1.8 times more volatile than First Trust Income. It trades about 0.01 of its total potential returns per unit of risk. First Trust Income is currently generating about 0.19 per unit of volatility. If you would invest  2,109  in First Trust Income on May 4, 2025 and sell it today you would earn a total of  127.00  from holding First Trust Income or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Vanguard Real Estate  vs.  First Trust Income

Vanguard Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Trust 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 Real and First Trust

The main advantage of trading using opposite Vanguard Real and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Real 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 Real Estate and First Trust Income 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.