Correlation Between First Trust and IShares ESG
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares ESG 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 ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and iShares ESG Screened, you can compare the effects of market volatilities on First Trust and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares ESG.
Diversification Opportunities for First Trust and IShares ESG
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 Dorsey are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of First Trust i.e., First Trust and IShares ESG go up and down completely randomly.
Pair Corralation between First Trust and IShares ESG
Allowing for the 90-day total investment horizon First Trust is expected to generate 1.53 times less return on investment than IShares ESG. But when comparing it to its historical volatility, First Trust Dorsey is 1.0 times less risky than IShares ESG. It trades about 0.18 of its potential returns per unit of risk. iShares ESG Screened is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,241 in iShares ESG Screened on August 28, 2024 and sell it today you would earn a total of 313.00 from holding iShares ESG Screened or generate 7.38% 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 Dorsey vs. iShares ESG Screened
Performance |
| Timeline |
| First Trust Dorsey |
| iShares ESG Screened |
First Trust and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares ESG
The main advantage of trading using opposite First Trust and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| First Trust vs. Vanguard Mid Cap Index | First Trust vs. iShares Core SP | First Trust vs. SPDR SP MIDCAP | First Trust vs. Vanguard SP Mid Cap |
| IShares ESG vs. Vanguard Mid Cap Index | IShares ESG vs. iShares Core SP | IShares ESG vs. SPDR SP MIDCAP | IShares ESG vs. First Trust Dorsey |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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