Correlation Between First Trust and IShares Biotechnology
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Biotechnology 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 First Trust and IShares Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and iShares Biotechnology ETF, you can compare the effects of market volatilities on First Trust and IShares Biotechnology 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 First Trust with a short position of IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Biotechnology.
Diversification Opportunities for First Trust and IShares Biotechnology
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF and First Trust 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 First Trust Exchange Traded are associated (or correlated) with IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of First Trust i.e., First Trust and IShares Biotechnology go up and down completely randomly.
Pair Corralation between First Trust and IShares Biotechnology
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.63 times more return on investment than IShares Biotechnology. However, First Trust Exchange Traded is 1.6 times less risky than IShares Biotechnology. It trades about 0.71 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about 0.22 per unit of risk. If you would invest 2,050 in First Trust Exchange Traded on November 2, 2024 and sell it today you would earn a total of 194.00 from holding First Trust Exchange Traded or generate 9.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. iShares Biotechnology ETF
Performance |
| Timeline |
| First Trust Exchange |
| iShares Biotechnology ETF |
First Trust and IShares Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Biotechnology
The main advantage of trading using opposite First Trust and IShares Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Biotechnology 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 IShares Biotechnology will offset losses from the drop in IShares Biotechnology's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Expanded | First Trust vs. BlackRock Future Health | First Trust vs. SPDR SP Health |
| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Ultimus Managers Trust | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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