Correlation Between IShares SP and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 100 and First Trust Enhanced, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and First Trust.
Diversification Opportunities for IShares SP and First Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 100 and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and IShares SP 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 SP 100 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 Enhanced has no effect on the direction of IShares SP i.e., IShares SP and First Trust go up and down completely randomly.
Pair Corralation between IShares SP and First Trust
Considering the 90-day investment horizon iShares SP 100 is expected to generate 1.29 times more return on investment than First Trust. However, IShares SP is 1.29 times more volatile than First Trust Enhanced. It trades about 0.32 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.33 per unit of risk. If you would invest 27,500 in iShares SP 100 on September 1, 2024 and sell it today you would earn a total of 1,515 from holding iShares SP 100 or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares SP 100 vs. First Trust Enhanced
Performance |
| Timeline |
| iShares SP 100 |
| First Trust Enhanced |
IShares SP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and First Trust
The main advantage of trading using opposite IShares SP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP vs. iShares Russell 1000 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares Russell 3000 | IShares SP vs. iShares SP Mid Cap |
| First Trust vs. Rivernorth Opportunistic Municipalome | First Trust vs. Blackrock Muni Intermediate | First Trust vs. Blackrock Muniholdings Ny | First Trust vs. Nuveen New York |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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