Correlation Between IShares High and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares High 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 High 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 High Dividend and First Trust Value, you can compare the effects of market volatilities on IShares High 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 High with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares High and First Trust.
Diversification Opportunities for IShares High and First Trust
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares High Dividend and First Trust Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Value and IShares High 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 High Dividend 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 Value has no effect on the direction of IShares High i.e., IShares High and First Trust go up and down completely randomly.
Pair Corralation between IShares High and First Trust
Assuming the 90 days trading horizon IShares High is expected to generate 1.12 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares High Dividend is 1.02 times less risky than First Trust. It trades about 0.16 of its potential returns per unit of risk. First Trust Value is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,310 in First Trust Value on August 29, 2024 and sell it today you would earn a total of 457.00 from holding First Trust Value or generate 13.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares High Dividend vs. First Trust Value
Performance |
| Timeline |
| iShares High Dividend |
| First Trust Value |
IShares High and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares High and First Trust
The main advantage of trading using opposite IShares High and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares High 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 High vs. BMO Europe High | IShares High vs. BMO Covered Call | IShares High vs. BMO Europe High | IShares High vs. Forstrong Global Income |
| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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