Correlation Between First Trust and IShares
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares 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 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and IShares, you can compare the effects of market volatilities on First Trust and IShares 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares.
Diversification Opportunities for First Trust and IShares
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and IShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 NASDAQ are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of First Trust i.e., First Trust and IShares go up and down completely randomly.
Pair Corralation between First Trust and IShares
Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 0.28 times more return on investment than IShares. However, First Trust NASDAQ is 3.51 times less risky than IShares. It trades about 0.08 of its potential returns per unit of risk. IShares is currently generating about -0.04 per unit of risk. If you would invest 4,068 in First Trust NASDAQ on September 3, 2024 and sell it today you would earn a total of 2,249 from holding First Trust NASDAQ or generate 55.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.65% |
| Values | Daily Returns |
First Trust NASDAQ vs. IShares
Performance |
| Timeline |
| First Trust NASDAQ |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Trust and IShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares
The main advantage of trading using opposite First Trust and IShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares 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 will offset losses from the drop in IShares' long position.| First Trust vs. Amplify ETF Trust | First Trust vs. Global X Cybersecurity | First Trust vs. iShares Cybersecurity and | First Trust vs. First Trust Cloud |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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