Correlation Between First Trust and IShares Exponential
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares Exponential 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 Exponential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and iShares Exponential Technologies, you can compare the effects of market volatilities on First Trust and IShares Exponential 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 Exponential. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares Exponential.
Diversification Opportunities for First Trust and IShares Exponential
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and iShares Exponential Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Exponential 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 NASDAQ are associated (or correlated) with IShares Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Exponential has no effect on the direction of First Trust i.e., First Trust and IShares Exponential go up and down completely randomly.
Pair Corralation between First Trust and IShares Exponential
Given the investment horizon of 90 days First Trust NASDAQ is expected to under-perform the IShares Exponential. In addition to that, First Trust is 1.85 times more volatile than iShares Exponential Technologies. It trades about -0.13 of its total potential returns per unit of risk. iShares Exponential Technologies is currently generating about -0.23 per unit of volatility. If you would invest 5,928 in iShares Exponential Technologies on January 24, 2024 and sell it today you would lose (331.00) from holding iShares Exponential Technologies or give up 5.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. iShares Exponential Technologi
Performance |
| Timeline |
| First Trust NASDAQ |
| iShares Exponential |
First Trust and IShares Exponential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and IShares Exponential
The main advantage of trading using opposite First Trust and IShares Exponential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares Exponential 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 Exponential will offset losses from the drop in IShares Exponential's long position.The idea behind First Trust NASDAQ and iShares Exponential Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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