Correlation Between IShares Ultra and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Ultra 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 Ultra 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 Ultra Short Term and First Trust RiverFront, you can compare the effects of market volatilities on IShares Ultra 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 Ultra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Ultra and First Trust.
Diversification Opportunities for IShares Ultra and First Trust
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding iShares Ultra Short Term and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront and IShares Ultra 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 Ultra Short Term 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 RiverFront has no effect on the direction of IShares Ultra i.e., IShares Ultra and First Trust go up and down completely randomly.
Pair Corralation between IShares Ultra and First Trust
Given the investment horizon of 90 days IShares Ultra is expected to generate 13.7 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Ultra Short Term is 33.28 times less risky than First Trust. It trades about 0.7 of its potential returns per unit of risk. First Trust RiverFront is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,920 in First Trust RiverFront on November 3, 2024 and sell it today you would earn a total of 293.00 from holding First Trust RiverFront or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
iShares Ultra Short Term vs. First Trust RiverFront
Performance |
| Timeline |
| iShares Ultra Short |
| First Trust RiverFront |
IShares Ultra and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Ultra and First Trust
The main advantage of trading using opposite IShares Ultra and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Ultra 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 Ultra vs. iShares Short Maturity | IShares Ultra vs. JPMorgan Ultra Short Income | IShares Ultra vs. Invesco Ultra Short | IShares Ultra vs. iShares 1 5 Year |
| First Trust vs. First Trust RiverFront | First Trust vs. First Trust RiverFront | First Trust vs. First Trust Eurozone | First Trust vs. First Trust Emerging |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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