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 Nasdaq, 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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 Nasdaq 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 ETF is expected to under-perform the First Trust. In addition to that, IShares Biotechnology is 1.38 times more volatile than First Trust Nasdaq. It trades about -0.05 of its total potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.01 per unit of volatility. If you would invest 2,825 in First Trust Nasdaq on August 28, 2024 and sell it today you would earn a total of 4.00 from holding First Trust Nasdaq or generate 0.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Biotechnology ETF vs. First Trust Nasdaq
Performance |
| Timeline |
| iShares Biotechnology ETF |
| First Trust Nasdaq |
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 Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Indxx |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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