Correlation Between IShares Short and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Short 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 Short 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 Short Maturity and First Trust Short, you can compare the effects of market volatilities on IShares Short 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 Short with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and First Trust.
Diversification Opportunities for IShares Short and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and IShares Short 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 Short Maturity 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 Short has no effect on the direction of IShares Short i.e., IShares Short and First Trust go up and down completely randomly.
Pair Corralation between IShares Short and First Trust
Given the investment horizon of 90 days iShares Short Maturity is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Short Maturity is 1.45 times less risky than First Trust. The etf trades about -0.03 of its potential returns per unit of risk. The First Trust Short is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,993 in First Trust Short on August 23, 2024 and sell it today you would lose (1.00) from holding First Trust Short or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Short Maturity vs. First Trust Short
Performance |
| Timeline |
| iShares Short Maturity |
| First Trust Short |
IShares Short and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Short and First Trust
The main advantage of trading using opposite IShares Short and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 Short vs. Invesco Ultra Short | IShares Short vs. iShares Ultra Short Term | IShares Short vs. PIMCO Enhanced Short | IShares Short vs. iShares Floating Rate |
| First Trust vs. iShares Treasury Floating | First Trust vs. iShares Short Term National | First Trust vs. iShares Short Maturity | First Trust vs. iShares Interest Rate |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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