Correlation Between IShares Micro and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Micro 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 Micro 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 Micro Cap ETF and First Trust Dow, you can compare the effects of market volatilities on IShares Micro 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 Micro with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Micro and First Trust.
Diversification Opportunities for IShares Micro 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 Micro Cap ETF and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and IShares Micro 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 Micro Cap ETF 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 Dow has no effect on the direction of IShares Micro i.e., IShares Micro and First Trust go up and down completely randomly.
Pair Corralation between IShares Micro and First Trust
Considering the 90-day investment horizon IShares Micro is expected to generate 1.04 times less return on investment than First Trust. In addition to that, IShares Micro is 1.07 times more volatile than First Trust Dow. It trades about 0.04 of its total potential returns per unit of risk. First Trust Dow is currently generating about 0.05 per unit of volatility. If you would invest 5,530 in First Trust Dow on August 28, 2024 and sell it today you would earn a total of 1,768 from holding First Trust Dow or generate 31.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Micro Cap ETF vs. First Trust Dow
Performance |
| Timeline |
| iShares Micro Cap |
| First Trust Dow |
IShares Micro and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Micro and First Trust
The main advantage of trading using opposite IShares Micro and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Micro 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 Micro vs. Invesco PureBeta MSCI | IShares Micro vs. Aquagold International | IShares Micro vs. Morningstar Unconstrained Allocation | IShares Micro vs. High Yield Municipal Fund |
| First Trust vs. iShares Micro Cap ETF | First Trust vs. Invesco SP MidCap | First Trust vs. Invesco SP SmallCap | First Trust vs. First Trust Small |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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