Correlation Between IShares IBonds and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares IBonds 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 IBonds 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 iBonds Dec and First Trust Long, you can compare the effects of market volatilities on IShares IBonds 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 IBonds with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and First Trust.
Diversification Opportunities for IShares IBonds and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and First Trust Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Long and IShares IBonds 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 iBonds Dec 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 Long has no effect on the direction of IShares IBonds i.e., IShares IBonds and First Trust go up and down completely randomly.
Pair Corralation between IShares IBonds and First Trust
Given the investment horizon of 90 days IShares IBonds is expected to generate 2.83 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares iBonds Dec is 2.22 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust Long is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,133 in First Trust Long on August 30, 2024 and sell it today you would earn a total of 12.00 from holding First Trust Long or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBonds Dec vs. First Trust Long
Performance |
| Timeline |
| iShares iBonds Dec |
| First Trust Long |
IShares IBonds and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBonds and First Trust
The main advantage of trading using opposite IShares IBonds and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBonds 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 IBonds vs. iShares iBonds Dec | IShares IBonds vs. iShares iBonds Dec | IShares IBonds vs. iShares iBonds Dec | IShares IBonds vs. iShares iBonds Dec |
| First Trust vs. SPDR Barclays Short | First Trust vs. SPDR Portfolio Intermediate | First Trust vs. SPDR Barclays Long | First Trust vs. SPDR Barclays Intermediate |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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