Correlation Between First Trust and IShares Core
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and IShares Core 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 Core Total, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Core.
Diversification Opportunities for First Trust and IShares Core
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and IShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and iShares Core Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Total 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 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 Total has no effect on the direction of First Trust i.e., First Trust and IShares Core go up and down completely randomly.
Pair Corralation between First Trust and IShares Core
Given the investment horizon of 90 days First Trust is expected to generate 1.61 times less return on investment than IShares Core. But when comparing it to its historical volatility, First Trust Enhanced is 9.16 times less risky than IShares Core. It trades about 0.63 of its potential returns per unit of risk. iShares Core Total is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,411 in iShares Core Total on August 29, 2024 and sell it today you would earn a total of 194.00 from holding iShares Core Total or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. iShares Core Total
Performance |
| Timeline |
| First Trust Enhanced |
| iShares Core Total |
First Trust and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Core
The main advantage of trading using opposite First Trust and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| 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 Core vs. iShares Core 1 5 | IShares Core vs. iShares Core International | IShares Core vs. iShares Treasury Bond | IShares Core 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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