Correlation Between IShares Core and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core MSCI and First Trust Europe, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and First Trust.
Diversification Opportunities for IShares Core and First Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and First Trust Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Europe and IShares Core 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 Core MSCI 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 Europe has no effect on the direction of IShares Core i.e., IShares Core and First Trust go up and down completely randomly.
Pair Corralation between IShares Core and First Trust
Given the investment horizon of 90 days IShares Core is expected to generate 1.13 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Core MSCI is 1.12 times less risky than First Trust. It trades about 0.04 of its potential returns per unit of risk. First Trust Europe is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,225 in First Trust Europe on August 31, 2024 and sell it today you would earn a total of 432.00 from holding First Trust Europe or generate 13.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. First Trust Europe
Performance |
| Timeline |
| iShares Core MSCI |
| First Trust Europe |
IShares Core and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and First Trust
The main advantage of trading using opposite IShares Core and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core vs. iShares Core MSCI | IShares Core vs. iShares Core MSCI | IShares Core vs. iShares MSCI Europe | IShares Core vs. iShares Currency Hedged |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Developed | First Trust vs. First Trust Large | First Trust vs. First Trust Japan |
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 Stocks Directory module to find actively traded stocks across global markets.
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