Correlation Between First Trust and IShares Core

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

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

Diversification Opportunities for First Trust and IShares Core

0.8

Correlation Coefficient

First Trust  IShares Core

Very poor diversification

The 3 months correlation between First and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Rising and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Rising are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of First Trust i.e., First Trust and IShares Core go up and down completely randomly.

Pair Corralation between First Trust and IShares Core

Given the investment horizon of 90 days First Trust Rising is expected to generate 0.71 times more return on investment than IShares Core. However, First Trust Rising is 1.41 times less risky than IShares Core. It trades about -0.02 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.11 per unit of risk. If you would invest  5,876  in First Trust Rising on December 28, 2024 and sell it today you would lose (73.00) from holding First Trust Rising or give up 1.24% of portfolio value over 90 days.

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

First Trust Rising  vs.  iShares Core SP

First Trust Rising

Risk-Adjusted Performance

Very Weak

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

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with First Trust and IShares Core

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

The idea behind First Trust Rising and iShares Core SP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.