Correlation Between IShares 1 and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares 1 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 1 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 1 5 Year and First Trust SMID, you can compare the effects of market volatilities on IShares 1 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 1 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and First Trust.
Diversification Opportunities for IShares 1 and First Trust
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and First is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID and IShares 1 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 1 5 Year 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 SMID has no effect on the direction of IShares 1 i.e., IShares 1 and First Trust go up and down completely randomly.
Pair Corralation between IShares 1 and First Trust
Assuming the 90 days trading horizon IShares 1 is expected to generate 22.69 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares 1 5 Year is 6.42 times less risky than First Trust. It trades about 0.08 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,972 in First Trust SMID on September 3, 2024 and sell it today you would earn a total of 469.00 from holding First Trust SMID or generate 23.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 12.12% |
| Values | Daily Returns |
iShares 1 5 Year vs. First Trust SMID
Performance |
| Timeline |
| iShares 1 5 |
| First Trust SMID |
IShares 1 and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and First Trust
The main advantage of trading using opposite IShares 1 and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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.| IShares 1 vs. iShares 1 5 Year | IShares 1 vs. iShares Premium Money | IShares 1 vs. iShares Canadian Government | IShares 1 vs. iShares Global Monthly |
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
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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