Correlation Between IShares Fallen and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Fallen 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 Fallen 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 Fallen Angels and First Trust Tactical, you can compare the effects of market volatilities on IShares Fallen 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 Fallen with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fallen and First Trust.
Diversification Opportunities for IShares Fallen and First Trust
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fallen Angels and First Trust Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Tactical and IShares Fallen 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 Fallen Angels 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 Tactical has no effect on the direction of IShares Fallen i.e., IShares Fallen and First Trust go up and down completely randomly.
Pair Corralation between IShares Fallen and First Trust
Given the investment horizon of 90 days iShares Fallen Angels is expected to generate 1.18 times more return on investment than First Trust. However, IShares Fallen is 1.18 times more volatile than First Trust Tactical. It trades about 0.13 of its potential returns per unit of risk. First Trust Tactical is currently generating about 0.12 per unit of risk. If you would invest 2,530 in iShares Fallen Angels on August 27, 2024 and sell it today you would earn a total of 172.00 from holding iShares Fallen Angels or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Fallen Angels vs. First Trust Tactical
Performance |
| Timeline |
| iShares Fallen Angels |
| First Trust Tactical |
IShares Fallen and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Fallen and First Trust
The main advantage of trading using opposite IShares Fallen and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fallen 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 Fallen vs. First Trust Senior | IShares Fallen vs. First Trust Low | IShares Fallen vs. First Trust Enhanced | IShares Fallen vs. First Trust TCW |
| First Trust vs. First Trust Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust TCW |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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