Correlation Between IShares VII and First Trust

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

Diversification Opportunities for IShares VII and First Trust

-0.28

Correlation Coefficient

IShares VII  First Trust

Very good diversification

The 3 months correlation between IShares and First is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII Public and First Trust California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust California and IShares VII 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 VII Public 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 California has no effect on the direction of IShares VII i.e., IShares VII and First Trust go up and down completely randomly.

Pair Corralation between IShares VII and First Trust

Assuming the 90 days horizon iShares VII Public is expected to generate 5.86 times more return on investment than First Trust. However, IShares VII is 5.86 times more volatile than First Trust California. It trades about 0.26 of its potential returns per unit of risk. First Trust California is currently generating about 0.01 per unit of risk. If you would invest  113,530  in iShares VII Public on May 7, 2025 and sell it today you would earn a total of  17,945  from holding iShares VII Public or generate 15.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

iShares VII Public  vs.  First Trust California

iShares VII Public

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII Public are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, IShares VII reported solid returns over the last few months and may actually be approaching a breakup point.

First Trust California

Risk-Adjusted Performance

Weakest

Over the last 90 days First Trust California has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares VII and First Trust

The main advantage of trading using opposite IShares VII and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII 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 VII Public and First Trust California 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.