Correlation Between IShares JP and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares JP 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 JP 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 JP Morgan and First Trust TCW, you can compare the effects of market volatilities on IShares JP 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 JP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JP and First Trust.
Diversification Opportunities for IShares JP and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and IShares JP 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 JP Morgan 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 TCW has no effect on the direction of IShares JP i.e., IShares JP and First Trust go up and down completely randomly.
Pair Corralation between IShares JP and First Trust
Considering the 90-day investment horizon iShares JP Morgan is expected to generate 0.89 times more return on investment than First Trust. However, iShares JP Morgan is 1.13 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.07 per unit of risk. If you would invest 9,093 in iShares JP Morgan on August 29, 2024 and sell it today you would earn a total of 96.00 from holding iShares JP Morgan or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares JP Morgan vs. First Trust TCW
Performance |
| Timeline |
| iShares JP Morgan |
| First Trust TCW |
IShares JP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares JP and First Trust
The main advantage of trading using opposite IShares JP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JP 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 JP vs. iShares iBoxx Investment | IShares JP vs. iShares iBoxx High | IShares JP vs. iShares National Muni | IShares JP vs. Invesco Emerging Markets |
| First Trust vs. First Trust TCW | First Trust vs. SPDR Bloomberg Barclays | First Trust vs. First Trust Short | First Trust vs. First Trust Emerging |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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