Correlation Between IShares 1 and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares 1 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 1 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 1 5 Year and First Trust Low, you can compare the effects of market volatilities on IShares 1 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 1 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and First Trust.
Diversification Opportunities for IShares 1 and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low and IShares 1 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 1 5 Year 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 Low has no effect on the direction of IShares 1 i.e., IShares 1 and First Trust go up and down completely randomly.
Pair Corralation between IShares 1 and First Trust
Given the investment horizon of 90 days iShares 1 5 Year is expected to generate 0.9 times more return on investment than First Trust. However, iShares 1 5 Year is 1.11 times less risky than First Trust. It trades about 0.12 of its potential returns per unit of risk. First Trust Low is currently generating about 0.09 per unit of risk. If you would invest 4,657 in iShares 1 5 Year on August 24, 2024 and sell it today you would earn a total of 525.00 from holding iShares 1 5 Year or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 1 5 Year vs. First Trust Low
Performance |
| Timeline |
| iShares 1 5 |
| First Trust Low |
IShares 1 and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 1 and First Trust
The main advantage of trading using opposite IShares 1 and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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.The idea behind iShares 1 5 Year and First Trust Low pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |