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 500, 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

0.9

Correlation Coefficient

FT Vest  IShares SP

Almost no diversification

The 3 months correlation between DHDG and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 500 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 Equity is expected to generate 0.64 times more return on investment than IShares SP. However, FT Vest Equity is 1.56 times less risky than IShares SP. It trades about -0.04 of its potential returns per unit of risk. iShares SP 500 is currently generating about -0.05 per unit of risk. If you would invest  3,067  in FT Vest Equity on December 28, 2024 and sell it today you would lose (40.00) from holding FT Vest Equity or give up 1.3% of portfolio value over 90 days.

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

FT Vest Equity  vs.  iShares SP 500

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 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated 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 500 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.