Correlation Between First Trust and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares MSCI 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 MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and iShares MSCI Emerging, you can compare the effects of market volatilities on First Trust and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares MSCI.
Diversification Opportunities for First Trust and IShares MSCI
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging 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 Emerging are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Emerging has no effect on the direction of First Trust i.e., First Trust and IShares MSCI go up and down completely randomly.
Pair Corralation between First Trust and IShares MSCI
Considering the 90-day investment horizon First Trust is expected to generate 1.27 times less return on investment than IShares MSCI. In addition to that, First Trust is 1.14 times more volatile than iShares MSCI Emerging. It trades about 0.04 of its total potential returns per unit of risk. iShares MSCI Emerging is currently generating about 0.05 per unit of volatility. If you would invest 4,721 in iShares MSCI Emerging on September 3, 2024 and sell it today you would earn a total of 1,056 from holding iShares MSCI Emerging or generate 22.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. iShares MSCI Emerging
Performance |
| Timeline |
| First Trust Emerging |
| iShares MSCI Emerging |
First Trust and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares MSCI
The main advantage of trading using opposite First Trust and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| First Trust vs. First Trust Developed | First Trust vs. First Trust Emerging | First Trust vs. First Trust Europe | First Trust vs. First Trust Large |
| IShares MSCI vs. SCOR PK | IShares MSCI vs. HUMANA INC | IShares MSCI vs. Aquagold International | IShares MSCI vs. Barloworld Ltd ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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