Correlation Between First Trust and IShares Convertible
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Convertible 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 Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange and iShares Convertible Bond, you can compare the effects of market volatilities on First Trust and IShares Convertible 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 Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Convertible.
Diversification Opportunities for First Trust and IShares Convertible
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond 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 are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of First Trust i.e., First Trust and IShares Convertible go up and down completely randomly.
Pair Corralation between First Trust and IShares Convertible
Given the investment horizon of 90 days First Trust is expected to generate 2.42 times less return on investment than IShares Convertible. But when comparing it to its historical volatility, First Trust Exchange is 2.74 times less risky than IShares Convertible. It trades about 0.24 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 8,683 in iShares Convertible Bond on September 13, 2024 and sell it today you would earn a total of 184.00 from holding iShares Convertible Bond or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange vs. iShares Convertible Bond
Performance |
| Timeline |
| First Trust Exchange |
| iShares Convertible Bond |
First Trust and IShares Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Convertible
The main advantage of trading using opposite First Trust and IShares Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Convertible 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 Convertible will offset losses from the drop in IShares Convertible's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| IShares Convertible vs. American Century ETF | IShares Convertible vs. American Century Quality | IShares Convertible vs. Rareview Dynamic Fixed | IShares Convertible vs. First Trust Exchange |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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