Correlation Between IShares Cybersecurity and First Trust

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

Diversification Opportunities for IShares Cybersecurity and First Trust

0.77

Correlation Coefficient

IShares Cybersecurity  First Trust

Poor diversification

The 3 months correlation between IShares and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Cybersecurity and and First Trust Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cloud and IShares Cybersecurity 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 Cybersecurity and 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 Cloud has no effect on the direction of IShares Cybersecurity i.e., IShares Cybersecurity and First Trust go up and down completely randomly.

Pair Corralation between IShares Cybersecurity and First Trust

Given the investment horizon of 90 days iShares Cybersecurity and is expected to generate 0.7 times more return on investment than First Trust. However, iShares Cybersecurity and is 1.44 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust Cloud is currently generating about -0.1 per unit of risk. If you would invest  4,884  in iShares Cybersecurity and on December 28, 2024 and sell it today you would earn a total of  11.00  from holding iShares Cybersecurity and or generate 0.23% return on investment over 90 days.

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

iShares Cybersecurity and  vs.  First Trust Cloud

iShares Cybersecurity and

Risk-Adjusted Performance

Very Weak

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

First Trust Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Cybersecurity and First Trust

The main advantage of trading using opposite IShares Cybersecurity and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Cybersecurity 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 Cybersecurity and and First Trust Cloud 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.