Correlation Between IShares GSCI and First Trust

Can any of the company-specific risk be diversified away by investing in both IShares GSCI 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 GSCI 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 GSCI Commodity and First Trust Global, you can compare the effects of market volatilities on IShares GSCI 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 GSCI with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GSCI and First Trust.

Diversification Opportunities for IShares GSCI and First Trust

0.7

Correlation Coefficient

IShares GSCI  First Trust

Poor diversification

The 3 months correlation between IShares and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares GSCI Commodity and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and IShares GSCI 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 GSCI Commodity 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 Global has no effect on the direction of IShares GSCI i.e., IShares GSCI and First Trust go up and down completely randomly.

Pair Corralation between IShares GSCI and First Trust

Given the investment horizon of 90 days IShares GSCI is expected to generate 1.66 times less return on investment than First Trust. In addition to that, IShares GSCI is 1.17 times more volatile than First Trust Global. It trades about 0.09 of its total potential returns per unit of risk. First Trust Global is currently generating about 0.17 per unit of volatility. If you would invest  2,377  in First Trust Global on December 29, 2024 and sell it today you would earn a total of  156.00  from holding First Trust Global or generate 6.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares GSCI Commodity  vs.  First Trust Global

iShares GSCI Commodity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares GSCI Commodity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares GSCI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares GSCI and First Trust

The main advantage of trading using opposite IShares GSCI and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GSCI 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.

The idea behind iShares GSCI Commodity and First Trust Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.