Correlation Between First Trust and IShares Robotics

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

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

Diversification Opportunities for First Trust and IShares Robotics

0.91

Correlation Coefficient

First Trust  IShares Robotics

Almost no diversification

The 3 months correlation between First and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and iShares Robotics and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Robotics 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 Nasdaq are associated (or correlated) with IShares Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Robotics has no effect on the direction of First Trust i.e., First Trust and IShares Robotics go up and down completely randomly.

Pair Corralation between First Trust and IShares Robotics

Given the investment horizon of 90 days First Trust Nasdaq is expected to under-perform the IShares Robotics. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Nasdaq is 1.04 times less risky than IShares Robotics. The etf trades about -0.13 of its potential returns per unit of risk. The iShares Robotics and is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,419  in iShares Robotics and on February 5, 2024 and sell it today you would lose (88.00) from holding iShares Robotics and or give up 2.57% 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 Nasdaq  vs.  iShares Robotics and

First Trust Nasdaq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, First Trust is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Robotics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Robotics and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Robotics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and IShares Robotics

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

The idea behind First Trust Nasdaq and iShares Robotics and 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.