Correlation Between First Trust and IShares Energy
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Energy 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 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SMID and iShares Energy ETF, you can compare the effects of market volatilities on First Trust and IShares Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Energy.
Diversification Opportunities for First Trust and IShares Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SMID and iShares Energy ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy ETF 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 SMID are associated (or correlated) with IShares Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy ETF has no effect on the direction of First Trust i.e., First Trust and IShares Energy go up and down completely randomly.
Pair Corralation between First Trust and IShares Energy
Given the investment horizon of 90 days First Trust SMID is expected to generate 1.11 times more return on investment than IShares Energy. However, First Trust is 1.11 times more volatile than iShares Energy ETF. It trades about 0.09 of its potential returns per unit of risk. iShares Energy ETF is currently generating about 0.08 per unit of risk. If you would invest 3,261 in First Trust SMID on August 27, 2024 and sell it today you would earn a total of 700.00 from holding First Trust SMID or generate 21.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SMID vs. iShares Energy ETF
Performance |
| Timeline |
| First Trust SMID |
| iShares Energy ETF |
First Trust and IShares Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Energy
The main advantage of trading using opposite First Trust and IShares Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Energy 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 Energy will offset losses from the drop in IShares Energy's long position.| First Trust vs. First Trust Rising | First Trust vs. First Trust Equity | First Trust vs. First Trust Small | First Trust vs. VictoryShares Small Cap |
| IShares Energy vs. iShares Basic Materials | IShares Energy vs. iShares Utilities ETF | IShares Energy vs. iShares Financials ETF | IShares Energy vs. iShares Healthcare ETF |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |