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 Total and First Trust TCW, 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
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Total and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW 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 Total 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 TCW 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 Total is expected to generate 0.86 times more return on investment than First Trust. However, iShares Core Total is 1.17 times less risky than First Trust. It trades about -0.04 of its potential returns per unit of risk. First Trust TCW is currently generating about -0.13 per unit of risk. If you would invest 4,574 in iShares Core Total on August 27, 2024 and sell it today you would lose (13.00) from holding iShares Core Total or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Total vs. First Trust TCW
Performance |
| Timeline |
| iShares Core Total |
| First Trust TCW |
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. First Trust Low | IShares Core vs. First Trust Enhanced | IShares Core vs. First Trust Tactical | IShares Core vs. First Trust Managed |
| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Tactical | First Trust vs. First Trust Managed |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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