Correlation Between IShares Consumer and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Consumer 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 Consumer 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 Consumer Discretionary and First Trust S Network, you can compare the effects of market volatilities on IShares Consumer 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 Consumer with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and First Trust.
Diversification Opportunities for IShares Consumer and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and First Trust S Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust S and IShares Consumer 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 Consumer Discretionary 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 S has no effect on the direction of IShares Consumer i.e., IShares Consumer and First Trust go up and down completely randomly.
Pair Corralation between IShares Consumer and First Trust
Considering the 90-day investment horizon IShares Consumer is expected to generate 1.06 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Consumer Discretionary is 1.25 times less risky than First Trust. It trades about 0.14 of its potential returns per unit of risk. First Trust S Network is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,673 in First Trust S Network on August 26, 2024 and sell it today you would earn a total of 995.00 from holding First Trust S Network or generate 37.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. First Trust S Network
Performance |
| Timeline |
| iShares Consumer Dis |
| First Trust S |
IShares Consumer and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and First Trust
The main advantage of trading using opposite IShares Consumer and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer vs. VanEck Pharmaceutical ETF | IShares Consumer vs. VanEck Biotech ETF | IShares Consumer vs. VanEck Oil Services | IShares Consumer vs. iShares Transportation Average |
| First Trust vs. Ember Therapeutics | First Trust vs. Leone Asset Management | First Trust vs. Opus Magnum Ameris |
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.
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