Correlation Between IShares Core and FT Vest

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

By analyzing existing cross correlation between iShares Core SP and FT Vest Equity, you can compare the effects of market volatilities on IShares Core and FT Vest 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 Core with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and FT Vest.

Diversification Opportunities for IShares Core and FT Vest

0.05

Correlation Coefficient

IShares Core  FT Vest

Significant diversification

The 3 months correlation between IShares and DHDG is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and IShares Core 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 Core SP are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of IShares Core i.e., IShares Core and FT Vest go up and down completely randomly.

Pair Corralation between IShares Core and FT Vest

Considering the 90-day investment horizon iShares Core SP is expected to generate 2.83 times more return on investment than FT Vest. However, IShares Core is 2.83 times more volatile than FT Vest Equity. It trades about 0.07 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.17 per unit of risk. If you would invest  4,727  in iShares Core SP on September 14, 2024 and sell it today you would earn a total of  1,868  from holding iShares Core SP or generate 39.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	7.69%
Values	Daily Returns

iShares Core SP  vs.  FT Vest Equity

iShares Core SP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FT Vest Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and FT Vest

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

The idea behind iShares Core SP and FT Vest Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.