Correlation Between IShares Short and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Short 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 Short 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 Short Treasury and First Trust Enhanced, you can compare the effects of market volatilities on IShares Short 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 Short with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and First Trust.
Diversification Opportunities for IShares Short and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Treasury 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 Short 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 Short Treasury 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 Short i.e., IShares Short and First Trust go up and down completely randomly.
Pair Corralation between IShares Short and First Trust
Considering the 90-day investment horizon IShares Short is expected to generate 1.03 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Short Treasury is 1.74 times less risky than First Trust. It trades about 1.03 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.61 of returns per unit of risk over similar time horizon. If you would invest 5,423 in First Trust Enhanced on August 23, 2024 and sell it today you would earn a total of 567.00 from holding First Trust Enhanced or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Short Treasury vs. First Trust Enhanced
Performance |
| Timeline |
| iShares Short Treasury |
| First Trust Enhanced |
IShares Short and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Short and First Trust
The main advantage of trading using opposite IShares Short and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 Short vs. SPDR Bloomberg 1 3 | IShares Short vs. JPMorgan Ultra Short Income | IShares Short vs. iShares Ultra Short Term | IShares Short vs. First Trust Enhanced |
| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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