Correlation Between First Trust and IShares SPTSX
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares SPTSX 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 SPTSX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cboe and iShares SPTSX 60, you can compare the effects of market volatilities on First Trust and IShares SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares SPTSX.
Diversification Opportunities for First Trust and IShares SPTSX
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 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 Cboe are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of First Trust i.e., First Trust and IShares SPTSX go up and down completely randomly.
Pair Corralation between First Trust and IShares SPTSX
Assuming the 90 days trading horizon First Trust is expected to generate 2.48 times less return on investment than IShares SPTSX. But when comparing it to its historical volatility, First Trust Cboe is 1.62 times less risky than IShares SPTSX. It trades about 0.44 of its potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.67 of returns per unit of risk over similar time horizon. If you would invest 3,637 in iShares SPTSX 60 on September 1, 2024 and sell it today you would earn a total of 241.00 from holding iShares SPTSX 60 or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Trust Cboe vs. iShares SPTSX 60
Performance |
| Timeline |
| First Trust Cboe |
| iShares SPTSX 60 |
First Trust and IShares SPTSX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares SPTSX
The main advantage of trading using opposite First Trust and IShares SPTSX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares SPTSX 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 SPTSX will offset losses from the drop in IShares SPTSX's long position.| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
| IShares SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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