Correlation Between First Trust and IShares New

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

By analyzing existing cross correlation between First Trust California and iShares New York, you can compare the effects of market volatilities on First Trust and IShares New 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 New. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares New.

Diversification Opportunities for First Trust and IShares New

0.97

Correlation Coefficient

First Trust  IShares New

Almost no diversification

The 3 months correlation between First and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust California and iShares New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares New York 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 California are associated (or correlated) with IShares New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares New York has no effect on the direction of First Trust i.e., First Trust and IShares New go up and down completely randomly.

Pair Corralation between First Trust and IShares New

Given the investment horizon of 90 days First Trust California is expected to under-perform the IShares New. But the etf apears to be less risky and, when comparing its historical volatility, First Trust California is 1.17 times less risky than IShares New. The etf trades about -0.02 of its potential returns per unit of risk. The iShares New York is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,309  in iShares New York on October 26, 2024 and sell it today you would earn a total of  12.00  from holding iShares New York or generate 0.23% 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 California  vs.  iShares New York

First Trust California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust California has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

iShares New York

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and IShares New

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

The idea behind First Trust California and iShares New York 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.