Correlation Between IShares Utilities and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Utilities 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 Utilities 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 Utilities ETF and First Trust SSI, you can compare the effects of market volatilities on IShares Utilities 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 Utilities with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and First Trust.
Diversification Opportunities for IShares Utilities and First Trust
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and First Trust SSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SSI and IShares Utilities 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 Utilities 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 SSI has no effect on the direction of IShares Utilities i.e., IShares Utilities and First Trust go up and down completely randomly.
Pair Corralation between IShares Utilities and First Trust
Considering the 90-day investment horizon iShares Utilities ETF is expected to generate 1.36 times more return on investment than First Trust. However, IShares Utilities is 1.36 times more volatile than First Trust SSI. It trades about 0.13 of its potential returns per unit of risk. First Trust SSI is currently generating about 0.17 per unit of risk. If you would invest 9,151 in iShares Utilities ETF on August 29, 2024 and sell it today you would earn a total of 1,401 from holding iShares Utilities ETF or generate 15.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. First Trust SSI
Performance |
| Timeline |
| iShares Utilities ETF |
| First Trust SSI |
IShares Utilities and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and First Trust
The main advantage of trading using opposite IShares Utilities and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities 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 Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Managed | First Trust vs. First Trust TCW | First Trust vs. First Trust Senior |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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