Correlation Between First Trust and IShares National
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares National 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 National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Managed and iShares National Muni, you can compare the effects of market volatilities on First Trust and IShares National 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 National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares National.
Diversification Opportunities for First Trust and IShares National
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and iShares National Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares National Muni 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 Managed are associated (or correlated) with IShares National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares National Muni has no effect on the direction of First Trust i.e., First Trust and IShares National go up and down completely randomly.
Pair Corralation between First Trust and IShares National
Considering the 90-day investment horizon First Trust Managed is expected to generate 0.92 times more return on investment than IShares National. However, First Trust Managed is 1.09 times less risky than IShares National. It trades about 0.0 of its potential returns per unit of risk. iShares National Muni is currently generating about -0.01 per unit of risk. If you would invest 5,076 in First Trust Managed on October 26, 2024 and sell it today you would lose (2.00) from holding First Trust Managed or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Managed vs. iShares National Muni
Performance |
| Timeline |
| First Trust Managed |
| iShares National Muni |
First Trust and IShares National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares National
The main advantage of trading using opposite First Trust and IShares National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares National 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 National will offset losses from the drop in IShares National's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW |
| IShares National vs. iShares JP Morgan | IShares National vs. iShares iBoxx Investment | IShares National vs. SPDR Nuveen Bloomberg | IShares National vs. VanEck High Yield |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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