Correlation Between IShares SPTSX and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares SPTSX 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 SPTSX 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 SPTSX 60 and First Trust Senior, you can compare the effects of market volatilities on IShares SPTSX 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 SPTSX with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SPTSX and First Trust.
Diversification Opportunities for IShares SPTSX and First Trust
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX 60 and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and IShares SPTSX 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 SPTSX 60 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 Senior has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and First Trust go up and down completely randomly.
Pair Corralation between IShares SPTSX and First Trust
Assuming the 90 days trading horizon iShares SPTSX 60 is expected to generate 2.11 times more return on investment than First Trust. However, IShares SPTSX is 2.11 times more volatile than First Trust Senior. It trades about 0.09 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.11 per unit of risk. If you would invest 2,903 in iShares SPTSX 60 on August 26, 2024 and sell it today you would earn a total of 938.00 from holding iShares SPTSX 60 or generate 32.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SPTSX 60 vs. First Trust Senior
Performance |
| Timeline |
| iShares SPTSX 60 |
| First Trust Senior |
IShares SPTSX and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SPTSX and First Trust
The main advantage of trading using opposite IShares SPTSX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX 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 SPTSX vs. iShares Core SP | IShares SPTSX vs. iShares Core SPTSX | IShares SPTSX vs. iShares SPTSX Capped | IShares SPTSX vs. iShares SPTSX Capped |
| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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