Correlation Between First Trust and IShares Insurance
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Insurance 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 Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Financials and iShares Insurance ETF, you can compare the effects of market volatilities on First Trust and IShares Insurance 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 Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Insurance.
Diversification Opportunities for First Trust and IShares Insurance
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Financials and iShares Insurance ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Insurance ETF 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 Financials are associated (or correlated) with IShares Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Insurance ETF has no effect on the direction of First Trust i.e., First Trust and IShares Insurance go up and down completely randomly.
Pair Corralation between First Trust and IShares Insurance
Considering the 90-day investment horizon First Trust Financials is expected to generate 1.09 times more return on investment than IShares Insurance. However, First Trust is 1.09 times more volatile than iShares Insurance ETF. It trades about 0.18 of its potential returns per unit of risk. iShares Insurance ETF is currently generating about 0.09 per unit of risk. If you would invest 5,399 in First Trust Financials on October 21, 2024 and sell it today you would earn a total of 211.00 from holding First Trust Financials or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Financials vs. iShares Insurance ETF
Performance |
| Timeline |
| First Trust Financials |
| iShares Insurance ETF |
First Trust and IShares Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Insurance
The main advantage of trading using opposite First Trust and IShares Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Insurance 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 Insurance will offset losses from the drop in IShares Insurance's long position.| First Trust vs. First Trust Consumer | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Materials | First Trust vs. First Trust Technology |
| IShares Insurance vs. iShares Broker Dealers Securities | IShares Insurance vs. SPDR SP Insurance | IShares Insurance vs. iShares Regional Banks | IShares Insurance vs. iShares Pharmaceuticals ETF |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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