Correlation Between First Trust and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares MSCI 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 First Trust and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and iShares MSCI Netherlands, you can compare the effects of market volatilities on First Trust and IShares MSCI 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 First Trust with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares MSCI.
Diversification Opportunities for First Trust and IShares MSCI
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and iShares MSCI Netherlands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Netherlands and First Trust 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 First Trust Japan are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Netherlands has no effect on the direction of First Trust i.e., First Trust and IShares MSCI go up and down completely randomly.
Pair Corralation between First Trust and IShares MSCI
Considering the 90-day investment horizon First Trust Japan is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Japan is 1.13 times less risky than IShares MSCI. The etf trades about -0.19 of its potential returns per unit of risk. The iShares MSCI Netherlands is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 4,917 in iShares MSCI Netherlands on January 25, 2024 and sell it today you would lose (68.00) from holding iShares MSCI Netherlands or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Japan vs. iShares MSCI Netherlands
Performance |
| Timeline |
| First Trust Japan |
| iShares MSCI Netherlands |
First Trust and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares MSCI
The main advantage of trading using opposite First Trust and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| First Trust vs. WisdomTree Europe Hedged | First Trust vs. WisdomTree Europe SmallCap | First Trust vs. iShares MSCI Germany |
| IShares MSCI vs. iShares MSCI Belgium | IShares MSCI vs. iShares MSCI Sweden | IShares MSCI vs. iShares MSCI France | IShares MSCI vs. iShares MSCI Switzerland |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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