Correlation Between Vanguard Total and First Trust

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

Diversification Opportunities for Vanguard Total and First Trust

0.98

Correlation Coefficient

Vanguard Total  First Trust

Almost no diversification

The 3 months correlation between Vanguard and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Vanguard Total 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 Total International 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 Short has no effect on the direction of Vanguard Total i.e., Vanguard Total and First Trust go up and down completely randomly.

Pair Corralation between Vanguard Total and First Trust

Assuming the 90 days horizon Vanguard Total International is expected to generate 4.13 times more return on investment than First Trust. However, Vanguard Total is 4.13 times more volatile than First Trust Short. It trades about 0.3 of its potential returns per unit of risk. First Trust Short is currently generating about 0.38 per unit of risk. If you would invest  14,034  in Vanguard Total International on April 23, 2025 and sell it today you would earn a total of  1,606  from holding Vanguard Total International or generate 11.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Vanguard Total International  vs.  First Trust Short

Vanguard Total Inter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in August 2025.

First Trust Short

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and First Trust

The main advantage of trading using opposite Vanguard Total and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total International and First Trust Short 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.