Correlation Between IShares ESG and First Trust

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

Diversification Opportunities for IShares ESG and First Trust

0.76

Correlation Coefficient

IShares ESG  First Trust

Poor diversification

The 3 months correlation between IShares and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and IShares ESG 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 ESG Aware 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 Global has no effect on the direction of IShares ESG i.e., IShares ESG and First Trust go up and down completely randomly.

Pair Corralation between IShares ESG and First Trust

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.95 times more return on investment than First Trust. However, iShares ESG Aware is 1.05 times less risky than First Trust. It trades about 0.17 of its potential returns per unit of risk. First Trust Global is currently generating about 0.06 per unit of risk. If you would invest  3,618  in iShares ESG Aware on May 4, 2025 and sell it today you would earn a total of  299.00  from holding iShares ESG Aware or generate 8.26% return on investment over 90 days.

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

iShares ESG Aware  vs.  First Trust Global

iShares ESG Aware

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Trust Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with IShares ESG and First Trust

The main advantage of trading using opposite IShares ESG and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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 ESG Aware and First Trust Global 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.