Correlation Between FT Vest and IShares SP

Can any of the company-specific risk be diversified away by investing in both FT Vest and IShares SP 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 FT Vest and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest Equity and iShares SP Mid Cap, you can compare the effects of market volatilities on FT Vest and IShares SP 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 FT Vest with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and IShares SP.

Diversification Opportunities for FT Vest and IShares SP

0.34

Correlation Coefficient

FT Vest  IShares SP

Weak diversification

The 3 months correlation between DHDG and IShares is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid and FT Vest 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 FT Vest Equity are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of FT Vest i.e., FT Vest and IShares SP go up and down completely randomly.

Pair Corralation between FT Vest and IShares SP

Given the investment horizon of 90 days FT Vest is expected to generate 2.61 times less return on investment than IShares SP. But when comparing it to its historical volatility, FT Vest Equity is 2.03 times less risky than IShares SP. It trades about 0.05 of its potential returns per unit of risk. iShares SP Mid Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,700  in iShares SP Mid Cap on December 2, 2024 and sell it today you would earn a total of  2,207  from holding iShares SP Mid Cap or generate 32.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	18.18%
Values	Daily Returns

FT Vest Equity  vs.  iShares SP Mid Cap

FT Vest Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Vest Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's forward-looking indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with FT Vest and IShares SP

The main advantage of trading using opposite FT Vest and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Vest position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.

The idea behind FT Vest Equity and iShares SP Mid Cap 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.