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 1 5 and First Trust Low, 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
0.97 | 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 Core 1 5 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 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 1 5 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 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 1.05 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Core 1 5 is 1.09 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Low is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,711 in First Trust Low on August 27, 2024 and sell it today you would earn a total of 171.00 from holding First Trust Low or generate 9.99% 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 1 5 vs. First Trust Low
Performance |
| Timeline |
| iShares Core 1 |
| First Trust Low |
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 10 | IShares Core vs. iShares Core Total | IShares Core vs. iShares Core MSCI | IShares Core vs. iShares 0 5 Year |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Low | First Trust vs. First Trust TCW | First Trust vs. First Trust SSI |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |