Correlation Between IShares Global and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Healthcare and First Trust Health, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and First Trust.
Diversification Opportunities for IShares Global and First Trust
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and First Trust Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Health and IShares Global 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 Global Healthcare 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 Health has no effect on the direction of IShares Global i.e., IShares Global and First Trust go up and down completely randomly.
Pair Corralation between IShares Global and First Trust
Considering the 90-day investment horizon iShares Global Healthcare is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Healthcare is 1.35 times less risky than First Trust. The etf trades about -0.32 of its potential returns per unit of risk. The First Trust Health is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,811 in First Trust Health on August 25, 2024 and sell it today you would earn a total of 133.00 from holding First Trust Health or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Healthcare vs. First Trust Health
Performance |
| Timeline |
| iShares Global Healthcare |
| First Trust Health |
IShares Global and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and First Trust
The main advantage of trading using opposite IShares Global and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global vs. Global X Clean | IShares Global vs. Global X Renewable | IShares Global vs. Global X Thematic | IShares Global vs. Global X AgTech |
| First Trust vs. First Trust Consumer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Technology | First Trust vs. First Trust Financials |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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