Correlation Between IShares Biotechnology and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Biotechnology and First Trust 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 IShares Biotechnology and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Biotechnology ETF and First Trust NYSE, you can compare the effects of market volatilities on IShares Biotechnology and First Trust 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 IShares Biotechnology with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Biotechnology and First Trust.
Diversification Opportunities for IShares Biotechnology and First Trust
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and First Trust NYSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NYSE and IShares Biotechnology 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 iShares Biotechnology ETF are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NYSE has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and First Trust go up and down completely randomly.
Pair Corralation between IShares Biotechnology and First Trust
Considering the 90-day investment horizon IShares Biotechnology is expected to generate 1.11 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Biotechnology ETF is 1.0 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust NYSE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 15,277 in First Trust NYSE on August 28, 2024 and sell it today you would earn a total of 1,845 from holding First Trust NYSE or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Biotechnology ETF vs. First Trust NYSE
Performance |
| Timeline |
| iShares Biotechnology ETF |
| First Trust NYSE |
IShares Biotechnology and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Biotechnology and First Trust
The main advantage of trading using opposite IShares Biotechnology and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Biotechnology position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Ultimus Managers Trust | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care |
| First Trust vs. First Trust Health | First Trust vs. Invesco Dynamic Biotechnology | First Trust vs. VanEck Biotech ETF | First Trust vs. Invesco Dynamic Pharmaceuticals |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |