Correlation Between IShares National and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares National 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 National 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 National Muni and First Trust Managed, you can compare the effects of market volatilities on IShares National 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 National with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares National and First Trust.
Diversification Opportunities for IShares National 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 National Muni and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and IShares National 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 National Muni 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 Managed has no effect on the direction of IShares National i.e., IShares National and First Trust go up and down completely randomly.
Pair Corralation between IShares National and First Trust
Considering the 90-day investment horizon iShares National Muni is expected to generate 1.06 times more return on investment than First Trust. However, IShares National is 1.06 times more volatile than First Trust Managed. It trades about -0.01 of its potential returns per unit of risk. First Trust Managed is currently generating about -0.05 per unit of risk. If you would invest 10,781 in iShares National Muni on August 26, 2024 and sell it today you would lose (20.00) from holding iShares National Muni or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares National Muni vs. First Trust Managed
Performance |
| Timeline |
| iShares National Muni |
| First Trust Managed |
IShares National and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares National and First Trust
The main advantage of trading using opposite IShares National and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares National 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 National vs. BlackRock Intermediate Muni | IShares National vs. SSGA Active Trust | IShares National vs. SPDR MarketAxess Investment | IShares National vs. SSGA Active Trust |
| First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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