Correlation Between IShares Healthcare and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare 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 Healthcare 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 Healthcare ETF and First Trust Nasdaq, you can compare the effects of market volatilities on IShares Healthcare 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 Healthcare with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and First Trust.
Diversification Opportunities for IShares Healthcare and First Trust
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and First is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and IShares Healthcare 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 Healthcare 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 Nasdaq has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and First Trust go up and down completely randomly.
Pair Corralation between IShares Healthcare and First Trust
Considering the 90-day investment horizon iShares Healthcare ETF is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Healthcare ETF is 1.65 times less risky than First Trust. The etf trades about -0.19 of its potential returns per unit of risk. The First Trust Nasdaq is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,693 in First Trust Nasdaq on September 12, 2024 and sell it today you would earn a total of 115.00 from holding First Trust Nasdaq or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. First Trust Nasdaq
Performance |
| Timeline |
| iShares Healthcare ETF |
| First Trust Nasdaq |
IShares Healthcare and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and First Trust
The main advantage of trading using opposite IShares Healthcare and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare 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 Healthcare vs. iShares Financials ETF | IShares Healthcare vs. iShares Consumer Discretionary | IShares Healthcare vs. iShares Industrials ETF | IShares Healthcare vs. iShares Consumer Staples |
| First Trust vs. First Trust Nasdaq | First Trust vs. Global X Aging | First Trust vs. Invesco Nasdaq Biotechnology | First Trust vs. First Trust Indxx |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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