Correlation Between IShares Factors and First Trust

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

Diversification Opportunities for IShares Factors and First Trust

0.0

Correlation Coefficient

IShares Factors  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 Factors Growth and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and IShares Factors 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 Factors Growth 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 Large has no effect on the direction of IShares Factors i.e., IShares Factors and First Trust go up and down completely randomly.

Pair Corralation between IShares Factors and First Trust

If you would invest (100.00) in iShares Factors Growth on December 27, 2024 and sell it today you would earn a total of  100.00  from holding iShares Factors Growth or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares Factors Growth  vs.  First Trust Large

iShares Factors Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Factors Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, IShares Factors is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Factors and First Trust

The main advantage of trading using opposite IShares Factors and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Factors 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 Factors Growth and First Trust Large 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.