Correlation Between First Trust and IShares ESG
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares ESG 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 ESG 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 ESG Aware, you can compare the effects of market volatilities on First Trust and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares ESG.
Diversification Opportunities for First Trust and IShares ESG
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of First Trust i.e., First Trust and IShares ESG go up and down completely randomly.
Pair Corralation between First Trust and IShares ESG
Assuming the 90 days trading horizon First Trust is expected to generate 1.18 times less return on investment than IShares ESG. But when comparing it to its historical volatility, First Trust Indxx is 1.1 times less risky than IShares ESG. It trades about 0.11 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,333 in iShares ESG Aware on September 2, 2024 and sell it today you would earn a total of 798.00 from holding iShares ESG Aware or generate 34.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
First Trust Indxx vs. iShares ESG Aware
Performance |
| Timeline |
| First Trust Indxx |
| iShares ESG Aware |
First Trust and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares ESG
The main advantage of trading using opposite First Trust and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
| IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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