Correlation Between First Trust and IShares Morningstar
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Morningstar 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 First Trust and IShares Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Expanded and iShares Morningstar Mid Cap, you can compare the effects of market volatilities on First Trust and IShares Morningstar 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 First Trust with a short position of IShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Morningstar.
Diversification Opportunities for First Trust and IShares Morningstar
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Expanded and iShares Morningstar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar Mid and First Trust 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 First Trust Expanded are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar Mid has no effect on the direction of First Trust i.e., First Trust and IShares Morningstar go up and down completely randomly.
Pair Corralation between First Trust and IShares Morningstar
Given the investment horizon of 90 days First Trust Expanded is expected to generate 1.36 times more return on investment than IShares Morningstar. However, First Trust is 1.36 times more volatile than iShares Morningstar Mid Cap. It trades about 0.11 of its potential returns per unit of risk. iShares Morningstar Mid Cap is currently generating about 0.08 per unit of risk. If you would invest 1,664 in First Trust Expanded on August 28, 2024 and sell it today you would earn a total of 1,380 from holding First Trust Expanded or generate 82.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Expanded vs. iShares Morningstar Mid Cap
Performance |
| Timeline |
| First Trust Expanded |
| iShares Morningstar Mid |
First Trust and IShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Morningstar
The main advantage of trading using opposite First Trust and IShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Morningstar 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 IShares Morningstar will offset losses from the drop in IShares Morningstar's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Commodity Directory Find actively traded commodities issued by global exchanges |