Correlation Between First Trust and IShares 1
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares 1 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 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and iShares 1 5 Year, you can compare the effects of market volatilities on First Trust and IShares 1 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 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares 1.
Diversification Opportunities for First Trust and IShares 1
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and iShares 1 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 5 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 Indxx are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 5 has no effect on the direction of First Trust i.e., First Trust and IShares 1 go up and down completely randomly.
Pair Corralation between First Trust and IShares 1
Assuming the 90 days trading horizon First Trust Indxx is expected to under-perform the IShares 1. In addition to that, First Trust is 1.54 times more volatile than iShares 1 5 Year. It trades about -0.21 of its total potential returns per unit of risk. iShares 1 5 Year is currently generating about 0.08 per unit of volatility. If you would invest 1,814 in iShares 1 5 Year on August 29, 2024 and sell it today you would earn a total of 5.00 from holding iShares 1 5 Year or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. iShares 1 5 Year
Performance |
| Timeline |
| First Trust Indxx |
| iShares 1 5 |
First Trust and IShares 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares 1
The main advantage of trading using opposite First Trust and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.The idea behind First Trust Indxx and iShares 1 5 Year pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares 1 vs. Mackenzie Canadian Aggregate | IShares 1 vs. Mackenzie Core Plus | IShares 1 vs. Mackenzie Investment Grade | IShares 1 vs. Mackenzie Core Plus |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |