Correlation Between First Trust and IShares Ultra
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Ultra 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 Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and iShares Ultra Short Term, you can compare the effects of market volatilities on First Trust and IShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Ultra.
Diversification Opportunities for First Trust and IShares Ultra
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and iShares Ultra Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ultra Short 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 Enhanced are associated (or correlated) with IShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ultra Short has no effect on the direction of First Trust i.e., First Trust and IShares Ultra go up and down completely randomly.
Pair Corralation between First Trust and IShares Ultra
Given the investment horizon of 90 days First Trust is expected to generate 1.06 times less return on investment than IShares Ultra. In addition to that, First Trust is 1.03 times more volatile than iShares Ultra Short Term. It trades about 0.61 of its total potential returns per unit of risk. iShares Ultra Short Term is currently generating about 0.67 per unit of volatility. If you would invest 4,546 in iShares Ultra Short Term on August 23, 2024 and sell it today you would earn a total of 510.00 from holding iShares Ultra Short Term or generate 11.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. iShares Ultra Short Term
Performance |
| Timeline |
| First Trust Enhanced |
| iShares Ultra Short |
First Trust and IShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Ultra
The main advantage of trading using opposite First Trust and IShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Ultra 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 Ultra will offset losses from the drop in IShares Ultra's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| IShares Ultra vs. iShares Short Maturity | IShares Ultra vs. JPMorgan Ultra Short Income | IShares Ultra vs. Invesco Ultra Short | IShares Ultra vs. iShares 1 5 Year |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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