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 Mid, 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
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid 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 Mid 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 is expected to generate 1.23 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Utilities ETF is 1.34 times less risky than First Trust. It trades about 0.14 of its potential returns per unit of risk. First Trust Mid is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,270 in First Trust Mid on August 30, 2024 and sell it today you would earn a total of 1,489 from holding First Trust Mid or generate 20.48% 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 Mid
Performance |
| Timeline |
| iShares Utilities ETF |
| First Trust Mid |
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. BlackRock Future Health | First Trust vs. Global X Thematic | First Trust vs. Aquagold International | First Trust vs. Morningstar Unconstrained Allocation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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