Correlation Between First Trust and IShares Core
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Core 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 Core 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 Core MSCI, you can compare the effects of market volatilities on First Trust and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Core.
Diversification Opportunities for First Trust and IShares Core
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of First Trust i.e., First Trust and IShares Core go up and down completely randomly.
Pair Corralation between First Trust and IShares Core
Considering the 90-day investment horizon First Trust Japan is expected to under-perform the IShares Core. In addition to that, First Trust is 1.18 times more volatile than iShares Core MSCI. It trades about -0.23 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about -0.01 per unit of volatility. If you would invest 5,127 in iShares Core MSCI on January 26, 2024 and sell it today you would lose (14.00) from holding iShares Core MSCI or give up 0.27% 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 Core MSCI
Performance |
Timeline |
First Trust Japan |
iShares Core MSCI |
First Trust and IShares Core Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and IShares Core
The main advantage of trading using opposite First Trust and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.First Trust vs. First Trust United | First Trust vs. First Trust Asia | First Trust vs. First Trust Germany | First Trust vs. First Trust Switzerland |
IShares Core vs. iShares MSCI China | IShares Core vs. iShares Dividend and | IShares Core vs. iShares MSCI Frontier | IShares Core vs. iShares Short Maturity |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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