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 Staples and First Trust Nasdaq, 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
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Staples 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 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 Staples 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 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 Staples is expected to generate 0.86 times more return on investment than First Trust. However, iShares Consumer Staples is 1.16 times less risky than First Trust. It trades about -0.07 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about -0.15 per unit of risk. If you would invest 6,578 in iShares Consumer Staples on October 24, 2024 and sell it today you would lose (71.00) from holding iShares Consumer Staples or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Staples vs. First Trust Nasdaq
Performance |
| Timeline |
| iShares Consumer Staples |
| First Trust Nasdaq |
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. iShares Consumer Discretionary | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Utilities ETF | IShares Consumer vs. iShares Basic Materials |
| First Trust vs. First Trust Consumer | First Trust vs. Fidelity MSCI Consumer | First Trust vs. iShares Consumer Staples | First Trust vs. iShares Global Consumer |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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