Correlation Between First Trust and IShares Genomics

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

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

Diversification Opportunities for First Trust and IShares Genomics

0.94

Correlation Coefficient

First Trust  IShares Genomics

Almost no diversification

The 3 months correlation between First and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and iShares Genomics Immunology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Genomics Imm 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 Nasdaq are associated (or correlated) with IShares Genomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Genomics Imm has no effect on the direction of First Trust i.e., First Trust and IShares Genomics go up and down completely randomly.

Pair Corralation between First Trust and IShares Genomics

Given the investment horizon of 90 days First Trust Nasdaq is expected to generate 0.72 times more return on investment than IShares Genomics. However, First Trust Nasdaq is 1.39 times less risky than IShares Genomics. It trades about -0.2 of its potential returns per unit of risk. iShares Genomics Immunology is currently generating about -0.18 per unit of risk. If you would invest  2,796  in First Trust Nasdaq on October 9, 2024 and sell it today you would lose (90.00) from holding First Trust Nasdaq or give up 3.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

First Trust Nasdaq  vs.  iShares Genomics Immunology

First Trust Nasdaq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

iShares Genomics Imm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Genomics Immunology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Genomics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and IShares Genomics

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

The idea behind First Trust Nasdaq and iShares Genomics Immunology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.