Correlation Between IShares Consumer and First Trust

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

Diversification Opportunities for IShares Consumer and First Trust

0.0

Correlation Coefficient

IShares Consumer  First Trust

Pay attention - limited upside

The 3 months correlation between IShares and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and First Trust S Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust S and IShares Consumer 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 Consumer Discretionary 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 S has no effect on the direction of IShares Consumer i.e., IShares Consumer and First Trust go up and down completely randomly.

Pair Corralation between IShares Consumer and First Trust

If you would invest  0.00  in First Trust S Network on December 28, 2024 and sell it today you would earn a total of  0.00  from holding First Trust S Network or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

iShares Consumer Discretionary  vs.  First Trust S Network

iShares Consumer Dis

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

First Trust S

Risk-Adjusted Performance

Insignificant

Over the last 90 days First Trust S Network has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, First Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Consumer and First Trust

The main advantage of trading using opposite IShares Consumer and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer Discretionary and First Trust S Network 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.