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 Consumer, 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
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Consumer and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer 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 Consumer 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 under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Consumer is 1.09 times less risky than First Trust. The etf trades about -0.11 of its potential returns per unit of risk. The First Trust Consumer is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 6,647 in First Trust Consumer on October 25, 2024 and sell it today you would lose (244.00) from holding First Trust Consumer or give up 3.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Consumer vs. First Trust Consumer
Performance |
| Timeline |
| iShares Global Consumer |
| First Trust Consumer |
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. iShares Global Consumer | IShares Global vs. iShares Global Utilities | IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Materials |
| First Trust vs. First Trust Consumer | First Trust vs. First Trust Health | First Trust vs. First Trust Utilities | First Trust vs. First Trust IndustrialsProducer |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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