Correlation Between First Trust and IShares MBS
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares MBS 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 MBS 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 MBS ETF, you can compare the effects of market volatilities on First Trust and IShares MBS 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 MBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares MBS.
Diversification Opportunities for First Trust and IShares MBS
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and iShares MBS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MBS 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 MBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MBS ETF has no effect on the direction of First Trust i.e., First Trust and IShares MBS go up and down completely randomly.
Pair Corralation between First Trust and IShares MBS
Given the investment horizon of 90 days First Trust is expected to generate 1.74 times less return on investment than IShares MBS. In addition to that, First Trust is 1.18 times more volatile than iShares MBS ETF. It trades about 0.08 of its total potential returns per unit of risk. iShares MBS ETF is currently generating about 0.17 per unit of volatility. If you would invest 9,253 in iShares MBS ETF on September 1, 2024 and sell it today you would earn a total of 140.00 from holding iShares MBS ETF or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Exchange Traded vs. iShares MBS ETF
Performance |
| Timeline |
| First Trust Exchange |
| iShares MBS ETF |
First Trust and IShares MBS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares MBS
The main advantage of trading using opposite First Trust and IShares MBS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares MBS 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 MBS will offset losses from the drop in IShares MBS's long position.| First Trust vs. Janus Henderson Short | First Trust vs. iShares CMBS ETF | First Trust vs. Janus Detroit Street | First Trust vs. Alpha Architect Gdsdn |
| IShares MBS vs. Janus Henderson Short | IShares MBS vs. iShares CMBS ETF | IShares MBS vs. Janus Detroit Street | IShares MBS vs. Alpha Architect Gdsdn |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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