Correlation Between FT AlphaDEX and IShares Core
Can any of the company-specific risk be diversified away by investing in both FT AlphaDEX and IShares Core 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 FT AlphaDEX and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT AlphaDEX Industrials and iShares Core SP, you can compare the effects of market volatilities on FT AlphaDEX and IShares Core 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 FT AlphaDEX with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT AlphaDEX and IShares Core.
Diversification Opportunities for FT AlphaDEX and IShares Core
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FHG and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding FT AlphaDEX Industrials and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and FT AlphaDEX 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 FT AlphaDEX Industrials are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of FT AlphaDEX i.e., FT AlphaDEX and IShares Core go up and down completely randomly.
Pair Corralation between FT AlphaDEX and IShares Core
Assuming the 90 days trading horizon FT AlphaDEX Industrials is expected to generate 1.35 times more return on investment than IShares Core. However, FT AlphaDEX is 1.35 times more volatile than iShares Core SP. It trades about 0.16 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.13 per unit of risk. If you would invest 4,951 in FT AlphaDEX Industrials on September 5, 2024 and sell it today you would earn a total of 1,172 from holding FT AlphaDEX Industrials or generate 23.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT AlphaDEX Industrials vs. iShares Core SP
Performance |
| Timeline |
| FT AlphaDEX Industrials |
| iShares Core SP |
FT AlphaDEX and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT AlphaDEX and IShares Core
The main advantage of trading using opposite FT AlphaDEX and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT AlphaDEX position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust AlphaDEX | FT AlphaDEX vs. First Trust Senior | FT AlphaDEX vs. First Trust Value |
| IShares Core vs. iShares Core MSCI | IShares Core vs. iShares SP Mid Cap | IShares Core vs. iShares High Dividend | IShares Core vs. iShares MSCI Europe |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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