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 SP and First Trust NASDAQ 100, 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 SP and First Trust NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 SP 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 NASDAQ 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 SP is expected to generate 0.97 times more return on investment than First Trust. However, iShares Core SP is 1.03 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust NASDAQ 100 is currently generating about 0.07 per unit of risk. If you would invest 8,483 in iShares Core SP on August 25, 2024 and sell it today you would earn a total of 5,254 from holding iShares Core SP or generate 61.94% 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 SP vs. First Trust NASDAQ 100
Performance |
| Timeline |
| iShares Core SP |
| First Trust NASDAQ |
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 SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares Russell Top | IShares Core vs. iShares Core MSCI |
| First Trust vs. Invesco Dynamic Large | First Trust vs. Perella Weinberg Partners | First Trust vs. HUMANA INC | First Trust vs. Aquagold International |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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