Correlation Between IShares Core and FT AlphaDEX
Can any of the company-specific risk be diversified away by investing in both IShares Core and FT AlphaDEX 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 Core and FT AlphaDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SPTSX and FT AlphaDEX Industrials, you can compare the effects of market volatilities on IShares Core and FT AlphaDEX 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 Core with a short position of FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and FT AlphaDEX.
Diversification Opportunities for IShares Core and FT AlphaDEX
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and FHG is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials and IShares Core 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 Core SPTSX are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of IShares Core i.e., IShares Core and FT AlphaDEX go up and down completely randomly.
Pair Corralation between IShares Core and FT AlphaDEX
Assuming the 90 days trading horizon IShares Core is expected to generate 2.1 times less return on investment than FT AlphaDEX. But when comparing it to its historical volatility, iShares Core SPTSX is 2.53 times less risky than FT AlphaDEX. It trades about 0.33 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 5,575 in FT AlphaDEX Industrials on August 26, 2024 and sell it today you would earn a total of 489.00 from holding FT AlphaDEX Industrials or generate 8.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SPTSX vs. FT AlphaDEX Industrials
Performance |
| Timeline |
| iShares Core SPTSX |
| FT AlphaDEX Industrials |
IShares Core and FT AlphaDEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and FT AlphaDEX
The main advantage of trading using opposite IShares Core and FT AlphaDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, FT AlphaDEX 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 FT AlphaDEX will offset losses from the drop in FT AlphaDEX's long position.| IShares Core vs. iShares SPTSX 60 | IShares Core vs. iShares Core SP | IShares Core vs. iShares SPTSX Composite | IShares Core vs. iShares Core MSCI |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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