Correlation Between First Trust and IShares GSCI

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

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

Diversification Opportunities for First Trust and IShares GSCI

0.96

Correlation Coefficient

First Trust  IShares GSCI

Almost no diversification

The 3 months correlation between First and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Global and iShares GSCI Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares GSCI Commodity 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 Global are associated (or correlated) with IShares GSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares GSCI Commodity has no effect on the direction of First Trust i.e., First Trust and IShares GSCI go up and down completely randomly.

Pair Corralation between First Trust and IShares GSCI

Given the investment horizon of 90 days First Trust Global is expected to generate 0.87 times more return on investment than IShares GSCI. However, First Trust Global is 1.15 times less risky than IShares GSCI. It trades about -0.04 of its potential returns per unit of risk. iShares GSCI Commodity is currently generating about -0.09 per unit of risk. If you would invest  2,493  in First Trust Global on February 3, 2025 and sell it today you would lose (66.00) from holding First Trust Global or give up 2.65% of portfolio value over 90 days.

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

First Trust Global  vs.  iShares GSCI Commodity

First Trust Global

Risk-Adjusted Performance

Very Weak

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

iShares GSCI Commodity

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares GSCI Commodity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with First Trust and IShares GSCI

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

The idea behind First Trust Global and iShares GSCI Commodity 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.