Correlation Between First Trust and IShares Expanded
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Expanded 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 Expanded into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dow and iShares Expanded Tech, you can compare the effects of market volatilities on First Trust and IShares Expanded 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 Expanded. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Expanded.
Diversification Opportunities for First Trust and IShares Expanded
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and iShares Expanded Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech 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 Dow are associated (or correlated) with IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of First Trust i.e., First Trust and IShares Expanded go up and down completely randomly.
Pair Corralation between First Trust and IShares Expanded
Considering the 90-day investment horizon First Trust Dow is expected to generate 0.89 times more return on investment than IShares Expanded. However, First Trust Dow is 1.13 times less risky than IShares Expanded. It trades about 0.4 of its potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.15 per unit of risk. If you would invest 21,575 in First Trust Dow on August 24, 2024 and sell it today you would earn a total of 2,269 from holding First Trust Dow or generate 10.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dow vs. iShares Expanded Tech
Performance |
| Timeline |
| First Trust Dow |
| iShares Expanded Tech |
First Trust and IShares Expanded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Expanded
The main advantage of trading using opposite First Trust and IShares Expanded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Expanded 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 Expanded will offset losses from the drop in IShares Expanded's long position.| First Trust vs. First Trust Cloud | First Trust vs. iShares Expanded Tech Software | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust NASDAQ 100 Technology |
| IShares Expanded vs. iShares Global Tech | IShares Expanded vs. iShares Technology ETF | IShares Expanded vs. iShares Consumer Discretionary | IShares Expanded vs. iShares Expanded Tech Software |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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