Correlation Between IShares Currency and First Trust

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

Diversification Opportunities for IShares Currency and First Trust

-0.01

Correlation Coefficient

IShares Currency  First Trust

Good diversification

The 3 months correlation between IShares and First is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and IShares Currency 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 Currency Hedged 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 Managed has no effect on the direction of IShares Currency i.e., IShares Currency and First Trust go up and down completely randomly.

Pair Corralation between IShares Currency and First Trust

Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 1.57 times more return on investment than First Trust. However, IShares Currency is 1.57 times more volatile than First Trust Managed. It trades about 0.01 of its potential returns per unit of risk. First Trust Managed is currently generating about 0.0 per unit of risk. If you would invest  3,222  in iShares Currency Hedged on October 10, 2024 and sell it today you would earn a total of  20.00  from holding iShares Currency Hedged or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

iShares Currency Hedged  vs.  First Trust Managed

iShares Currency Hedged

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust Managed

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Currency and First Trust

The main advantage of trading using opposite IShares Currency and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency 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 Currency Hedged and First Trust Managed 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.