Correlation Between IShares and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares 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 IShares and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares and First Trust, you can compare the effects of market volatilities on IShares 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 IShares with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares and First Trust.
Diversification Opportunities for IShares and First Trust
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding IShares and First Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust and IShares 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 IShares 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 has no effect on the direction of IShares i.e., IShares and First Trust go up and down completely randomly.
Pair Corralation between IShares and First Trust
If you would invest (100.00) in First Trust on January 25, 2024 and sell it today you would earn a total of 100.00 from holding First Trust or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IShares vs. First Trust
Performance |
| Timeline |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IShares and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares and First Trust
The main advantage of trading using opposite IShares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 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 IShares and First Trust 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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