Correlation Between IShares 10 and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares 10 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 10 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 10 20 Year and First Trust Long, you can compare the effects of market volatilities on IShares 10 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 10 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 10 and First Trust.
Diversification Opportunities for IShares 10 and First Trust
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and First is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares 10 20 Year and First Trust Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Long and IShares 10 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 10 20 Year 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 Long has no effect on the direction of IShares 10 i.e., IShares 10 and First Trust go up and down completely randomly.
Pair Corralation between IShares 10 and First Trust
Considering the 90-day investment horizon iShares 10 20 Year is expected to under-perform the First Trust. In addition to that, IShares 10 is 1.26 times more volatile than First Trust Long. It trades about -0.01 of its total potential returns per unit of risk. First Trust Long is currently generating about -0.01 per unit of volatility. If you would invest 2,152 in First Trust Long on August 27, 2024 and sell it today you would lose (45.00) from holding First Trust Long or give up 2.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares 10 20 Year vs. First Trust Long
Performance |
| Timeline |
| iShares 10 20 |
| First Trust Long |
IShares 10 and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares 10 and First Trust
The main advantage of trading using opposite IShares 10 and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 10 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 10 vs. iShares 3 7 Year | IShares 10 vs. iShares Short Treasury | IShares 10 vs. iShares Intermediate GovernmentCredit | IShares 10 vs. iShares GovernmentCredit Bond |
| First Trust vs. iShares Treasury Floating | First Trust vs. iShares iBonds Dec | First Trust vs. iShares iBonds Dec | First Trust vs. iShares 0 3 Month |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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