Correlation Between First Trust and IShares JPX
Can any of the company-specific risk be diversified away by investing in both First Trust and IShares JPX 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 JPX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and IShares JPX Nikkei 400, you can compare the effects of market volatilities on First Trust and IShares JPX 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 JPX. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and IShares JPX.
Diversification Opportunities for First Trust and IShares JPX
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and IShares JPX-Nikkei 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares JPX-Nikkei 400 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 Japan are associated (or correlated) with IShares JPX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares JPX-Nikkei 400 has no effect on the direction of First Trust i.e., First Trust and IShares JPX go up and down completely randomly.
Pair Corralation between First Trust and IShares JPX
Considering the 90-day investment horizon First Trust Japan is expected to generate 1.16 times more return on investment than IShares JPX. However, First Trust is 1.16 times more volatile than IShares JPX Nikkei 400. It trades about 0.19 of its potential returns per unit of risk. IShares JPX Nikkei 400 is currently generating about 0.18 per unit of risk. If you would invest 5,270 in First Trust Japan on December 29, 2023 and sell it today you would earn a total of 248.00 from holding First Trust Japan or generate 4.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 95.65% |
Values | Daily Returns |
First Trust Japan vs. IShares JPX-Nikkei 400
Performance |
Timeline |
First Trust Japan |
IShares JPX-Nikkei 400 |
First Trust and IShares JPX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and IShares JPX
The main advantage of trading using opposite First Trust and IShares JPX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, IShares JPX 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 JPX will offset losses from the drop in IShares JPX's long position.First Trust vs. Davis Select International | First Trust vs. Dimensional ETF Trust | First Trust vs. Principal Value ETF | First Trust vs. Vanguard Small Cap Index |
IShares JPX vs. Freedom Day Dividend | IShares JPX vs. IShares MSCI China | IShares JPX vs. SmartETFs Dividend Builder | IShares JPX vs. Listed Funds Trust |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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