Correlation Between First Trust and IShares Trust
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares 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 First Trust and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Multi Asset and iShares Trust, you can compare the effects of market volatilities on First Trust and IShares 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 First Trust with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Trust.
Diversification Opportunities for First Trust and IShares Trust
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Multi Asset are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of First Trust i.e., First Trust and IShares Trust go up and down completely randomly.
Pair Corralation between First Trust and IShares Trust
Given the investment horizon of 90 days First Trust Multi Asset is expected to under-perform the IShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Multi Asset is 1.05 times less risky than IShares Trust. The etf trades about -0.01 of its potential returns per unit of risk. The iShares Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,227 in iShares Trust on September 12, 2024 and sell it today you would earn a total of 27.00 from holding iShares Trust or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Multi Asset vs. iShares Trust
Performance |
| Timeline |
| First Trust Multi |
| iShares Trust |
First Trust and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Trust
The main advantage of trading using opposite First Trust and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| First Trust vs. Global X SuperIncome | First Trust vs. iShares Morningstar Multi Asset | First Trust vs. Invesco CEF Income | First Trust vs. VanEck Fallen Angel |
| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. EA Series Trust | IShares Trust vs. Aptus Defined Risk |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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