Correlation Between First Trust and IShares Core

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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 Multi Asset and iShares Core Moderate, 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

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between First and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and iShares Core Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Moderate 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 Multi Asset 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 Moderate 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

Given the investment horizon of 90 days First Trust is expected to generate 1.03 times less return on investment than IShares Core. In addition to that, First Trust is 1.45 times more volatile than iShares Core Moderate. It trades about 0.06 of its total potential returns per unit of risk. iShares Core Moderate is currently generating about 0.1 per unit of volatility. If you would invest  3,653  in iShares Core Moderate on July 7, 2024 and sell it today you would earn a total of  808.00  from holding iShares Core Moderate or generate 22.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

First Trust Multi Asset  vs.  iShares Core Moderate

 Performance 
       Timeline  
First Trust Multi 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in November 2024.
iShares Core Moderate 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Moderate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.
The idea behind First Trust Multi Asset and iShares Core Moderate 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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