Correlation Between First Trust and IShares Bloomberg

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

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

Diversification Opportunities for First Trust and IShares Bloomberg

-0.04

Correlation Coefficient

First Trust  IShares Bloomberg

Good diversification

The 3 months correlation between First and IShares is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Alternative and iShares Bloomberg Roll in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Bloomberg Roll 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 Alternative are associated (or correlated) with IShares Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Bloomberg Roll has no effect on the direction of First Trust i.e., First Trust and IShares Bloomberg go up and down completely randomly.

Pair Corralation between First Trust and IShares Bloomberg

Given the investment horizon of 90 days First Trust is expected to generate 3.07 times less return on investment than IShares Bloomberg. But when comparing it to its historical volatility, First Trust Alternative is 1.47 times less risky than IShares Bloomberg. It trades about 0.04 of its potential returns per unit of risk. iShares Bloomberg Roll is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,789  in iShares Bloomberg Roll on September 13, 2024 and sell it today you would earn a total of  190.00  from holding iShares Bloomberg Roll or generate 3.97% return on investment over 90 days.

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

First Trust Alternative  vs.  iShares Bloomberg Roll

First Trust Alternative

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Alternative are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic 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.

iShares Bloomberg Roll

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Bloomberg Roll are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and IShares Bloomberg

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

The idea behind First Trust Alternative and iShares Bloomberg Roll 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.