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 Capped and First Trust NASDAQ, 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
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and First is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 Capped 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 NASDAQ 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 is expected to generate 4.82 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares SPTSX Capped is 2.15 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,935 in First Trust NASDAQ on August 29, 2024 and sell it today you would earn a total of 213.00 from holding First Trust NASDAQ or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares SPTSX Capped vs. First Trust NASDAQ
Performance |
| Timeline |
| iShares SPTSX Capped |
| First Trust NASDAQ |
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 SPTSX Capped | IShares SPTSX vs. iShares Global Healthcare | IShares SPTSX vs. BMO Equal Weight | IShares SPTSX vs. iShares SPTSX Capped |
| First Trust vs. BMO Covered Call | First Trust vs. BMO Canadian High | First Trust vs. BMO Europe High | First Trust vs. Harvest Healthcare Leaders |
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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