Correlation Between First Trust and IShares Industrials
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Industrials 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 First Trust and IShares Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and iShares Industrials ETF, you can compare the effects of market volatilities on First Trust and IShares Industrials 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 First Trust with a short position of IShares Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Industrials.
Diversification Opportunities for First Trust and IShares Industrials
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and iShares Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Industrials ETF and First Trust 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 First Trust Exchange Traded are associated (or correlated) with IShares Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Industrials ETF has no effect on the direction of First Trust i.e., First Trust and IShares Industrials go up and down completely randomly.
Pair Corralation between First Trust and IShares Industrials
Given the investment horizon of 90 days First Trust is expected to generate 1.03 times less return on investment than IShares Industrials. In addition to that, First Trust is 1.38 times more volatile than iShares Industrials ETF. It trades about 0.15 of its total potential returns per unit of risk. iShares Industrials ETF is currently generating about 0.21 per unit of volatility. If you would invest 12,744 in iShares Industrials ETF on August 28, 2024 and sell it today you would earn a total of 1,616 from holding iShares Industrials ETF or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. iShares Industrials ETF
Performance |
| Timeline |
| First Trust Exchange |
| iShares Industrials ETF |
First Trust and IShares Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Industrials
The main advantage of trading using opposite First Trust and IShares Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Industrials 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 IShares Industrials will offset losses from the drop in IShares Industrials' long position.| First Trust vs. Invesco Dynamic Large | First Trust vs. Perella Weinberg Partners | First Trust vs. HUMANA INC | First Trust vs. Aquagold International |
| IShares Industrials vs. Gabelli ETFs Trust | IShares Industrials vs. First Trust Exchange Traded | IShares Industrials vs. Northern Lights | IShares Industrials vs. First Trust Exchange Traded |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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