Correlation Between IShares Technology and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Technology 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 Technology 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 Technology ETF and First Trust Technology, you can compare the effects of market volatilities on IShares Technology 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 Technology with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and First Trust.
Diversification Opportunities for IShares Technology 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 Technology ETF and First Trust Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Technology and IShares Technology 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 Technology 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 Technology has no effect on the direction of IShares Technology i.e., IShares Technology and First Trust go up and down completely randomly.
Pair Corralation between IShares Technology and First Trust
Considering the 90-day investment horizon IShares Technology is expected to generate 2.79 times less return on investment than First Trust. In addition to that, IShares Technology is 1.0 times more volatile than First Trust Technology. It trades about 0.11 of its total potential returns per unit of risk. First Trust Technology is currently generating about 0.3 per unit of volatility. If you would invest 14,127 in First Trust Technology on August 25, 2024 and sell it today you would earn a total of 1,275 from holding First Trust Technology or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Technology ETF vs. First Trust Technology
Performance |
| Timeline |
| iShares Technology ETF |
| First Trust Technology |
IShares Technology and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Technology and First Trust
The main advantage of trading using opposite IShares Technology and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology 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 Technology vs. iShares Healthcare ETF | IShares Technology vs. iShares Financials ETF | IShares Technology vs. iShares Telecommunications ETF | IShares Technology vs. iShares Industrials ETF |
| First Trust vs. First Trust Financials | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Health | First Trust vs. First Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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