Correlation Between IShares Mortgage and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Mortgage 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 Mortgage 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 Mortgage Real and First Trust SP, you can compare the effects of market volatilities on IShares Mortgage 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 Mortgage with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Mortgage and First Trust.
Diversification Opportunities for IShares Mortgage and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares Mortgage Real and First Trust SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SP and IShares Mortgage 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 Mortgage Real 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 SP has no effect on the direction of IShares Mortgage i.e., IShares Mortgage and First Trust go up and down completely randomly.
Pair Corralation between IShares Mortgage and First Trust
Considering the 90-day investment horizon IShares Mortgage is expected to generate 4.13 times less return on investment than First Trust. In addition to that, IShares Mortgage is 1.06 times more volatile than First Trust SP. It trades about 0.01 of its total potential returns per unit of risk. First Trust SP is currently generating about 0.03 per unit of volatility. If you would invest 2,644 in First Trust SP on October 22, 2024 and sell it today you would earn a total of 93.00 from holding First Trust SP or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Mortgage Real vs. First Trust SP
Performance |
| Timeline |
| iShares Mortgage Real |
| First Trust SP |
IShares Mortgage and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Mortgage and First Trust
The main advantage of trading using opposite IShares Mortgage and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Mortgage 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 Mortgage vs. VanEck Mortgage REIT | IShares Mortgage vs. iShares Residential and | IShares Mortgage vs. iShares Preferred and | IShares Mortgage vs. Global X SuperDividend |
| First Trust vs. Invesco Active Real | First Trust vs. First Trust Consumer | First Trust vs. First Trust Utilities | First Trust vs. iShares Residential and |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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