Correlation Between IPath Bloomberg and First Trust
Can any of the company-specific risk be diversified away by investing in both IPath Bloomberg 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 IPath Bloomberg and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iPath Bloomberg Commodity and First Trust Global, you can compare the effects of market volatilities on IPath Bloomberg 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 IPath Bloomberg with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Bloomberg and First Trust.
Diversification Opportunities for IPath Bloomberg and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IPath and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iPath Bloomberg Commodity and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and IPath Bloomberg 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 iPath Bloomberg Commodity 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 Global has no effect on the direction of IPath Bloomberg i.e., IPath Bloomberg and First Trust go up and down completely randomly.
Pair Corralation between IPath Bloomberg and First Trust
Considering the 90-day investment horizon iPath Bloomberg Commodity is expected to under-perform the First Trust. In addition to that, IPath Bloomberg is 1.29 times more volatile than First Trust Global. It trades about -0.04 of its total potential returns per unit of risk. First Trust Global is currently generating about 0.02 per unit of volatility. If you would invest 2,354 in First Trust Global on August 31, 2024 and sell it today you would earn a total of 7.00 from holding First Trust Global or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iPath Bloomberg Commodity vs. First Trust Global
Performance |
| Timeline |
| iPath Bloomberg Commodity |
| First Trust Global |
IPath Bloomberg and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPath Bloomberg and First Trust
The main advantage of trading using opposite IPath Bloomberg and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPath Bloomberg 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.| IPath Bloomberg vs. iShares SP GSCI | IPath Bloomberg vs. Invesco DB Commodity | IPath Bloomberg vs. Invesco DB Base |
| First Trust vs. iShares GSCI Commodity | First Trust vs. Invesco Optimum Yield | First Trust vs. First Trust Senior | First Trust vs. First Trust Capital |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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