Correlation Between Wealthsimple Shariah and First Trust

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

By analyzing existing cross correlation between Wealthsimple Shariah World and First Trust Large, you can compare the effects of market volatilities on Wealthsimple Shariah 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 Wealthsimple Shariah with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthsimple Shariah and First Trust.

Diversification Opportunities for Wealthsimple Shariah and First Trust

0.42

Correlation Coefficient

Wealthsimple Shariah  First Trust

Very weak diversification

The 3 months correlation between Wealthsimple and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Shariah World 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 Wealthsimple Shariah 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 Wealthsimple Shariah World 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 Wealthsimple Shariah i.e., Wealthsimple Shariah and First Trust go up and down completely randomly.

Pair Corralation between Wealthsimple Shariah and First Trust

Assuming the 90 days trading horizon Wealthsimple Shariah World is expected to generate 0.62 times more return on investment than First Trust. However, Wealthsimple Shariah World is 1.63 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 -0.04 per unit of risk. If you would invest  3,204  in Wealthsimple Shariah World on August 26, 2025 and sell it today you would earn a total of  34.00  from holding Wealthsimple Shariah World or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Wealthsimple Shariah World  vs.  First Trust Large

Wealthsimple Shariah

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Shariah World are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wealthsimple Shariah is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Large

Risk-Adjusted Performance

Weakest

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

Pair Trading with Wealthsimple Shariah and First Trust

The main advantage of trading using opposite Wealthsimple Shariah and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple Shariah 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 Wealthsimple Shariah World 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 Transaction History module to view history of all your transactions and understand their impact on performance.