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 Consumer and First Trust Nasdaq, 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
0.97 | 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 Global Consumer 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 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 Consumer 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 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 Consumer is expected to generate 0.88 times more return on investment than First Trust. However, iShares Global Consumer is 1.13 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.03 per unit of risk. If you would invest 5,908 in iShares Global Consumer on August 27, 2024 and sell it today you would earn a total of 398.00 from holding iShares Global Consumer or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Consumer vs. First Trust Nasdaq
Performance |
| Timeline |
| iShares Global Consumer |
| First Trust Nasdaq |
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. Vanguard Consumer Discretionary | IShares Global vs. Vanguard Utilities Index | IShares Global vs. Vanguard Industrials Index | IShares Global vs. Vanguard Materials Index |
| First Trust vs. Vanguard Consumer Discretionary | First Trust vs. Vanguard Utilities Index | First Trust vs. Vanguard Industrials Index | First Trust vs. Vanguard Materials Index |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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