Correlation Between First Trust and IShares Short
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Short and iShares Short Maturity, you can compare the effects of market volatilities on First Trust and IShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Short.
Diversification Opportunities for First Trust and IShares Short
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Short and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 Short are associated (or correlated) with IShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of First Trust i.e., First Trust and IShares Short go up and down completely randomly.
Pair Corralation between First Trust and IShares Short
Given the investment horizon of 90 days First Trust is expected to generate 1.22 times less return on investment than IShares Short. In addition to that, First Trust is 1.69 times more volatile than iShares Short Maturity. It trades about 0.09 of its total potential returns per unit of risk. iShares Short Maturity is currently generating about 0.18 per unit of volatility. If you would invest 4,973 in iShares Short Maturity on October 26, 2024 and sell it today you would earn a total of 37.00 from holding iShares Short Maturity or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Short vs. iShares Short Maturity
Performance |
| Timeline |
| First Trust Short |
| iShares Short Maturity |
First Trust and IShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Short
The main advantage of trading using opposite First Trust and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Short 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 Short will offset losses from the drop in IShares Short's long position.| First Trust vs. First Trust Ultra | First Trust vs. First Trust Municipal | First Trust vs. First Trust Managed | First Trust vs. First Trust Institutional |
| IShares Short vs. iShares Treasury Floating | IShares Short vs. iShares Short Term National | IShares Short vs. iShares Short Maturity | IShares Short vs. iShares Interest Rate |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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