Correlation Between IShares MSCI and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Europe and First Trust Eurozone, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and First Trust.
Diversification Opportunities for IShares MSCI and First Trust
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and First Trust Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Eurozone and IShares MSCI 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 MSCI Europe 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 Eurozone has no effect on the direction of IShares MSCI i.e., IShares MSCI and First Trust go up and down completely randomly.
Pair Corralation between IShares MSCI and First Trust
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.27 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares MSCI Europe is 1.04 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust Eurozone is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,457 in First Trust Eurozone on September 3, 2024 and sell it today you would earn a total of 665.00 from holding First Trust Eurozone or generate 19.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
iShares MSCI Europe vs. First Trust Eurozone
Performance |
| Timeline |
| iShares MSCI Europe |
| First Trust Eurozone |
IShares MSCI and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and First Trust
The main advantage of trading using opposite IShares MSCI and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. iShares MSCI Emerging | IShares MSCI vs. Invesco International BuyBack | IShares MSCI vs. First Trust Eurozone | IShares MSCI vs. iShares MSCI Qatar |
| First Trust vs. First Trust Germany | First Trust vs. First Trust Japan | First Trust vs. First Trust United | First Trust vs. First Trust Developed |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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