Correlation Between IShares Core and First Trust

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

Diversification Opportunities for IShares Core and First Trust

0.98

Correlation Coefficient

IShares Core  First Trust

Almost no diversification

The 3 months correlation between IShares and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend 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 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 Dividend 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 Core i.e., IShares Core and First Trust go up and down completely randomly.

Pair Corralation between IShares Core and First Trust

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 0.89 times more return on investment than First Trust. However, iShares Core Dividend is 1.12 times less risky than First Trust. It trades about -0.03 of its potential returns per unit of risk. First Trust Large is currently generating about -0.03 per unit of risk. If you would invest  6,296  in iShares Core Dividend on February 3, 2025 and sell it today you would lose (217.00) from holding iShares Core Dividend or give up 3.45% of portfolio value over 90 days.

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

iShares Core Dividend  vs.  First Trust Large

iShares Core Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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. Despite somewhat strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and First Trust

The main advantage of trading using opposite IShares Core and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core Dividend 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.