Correlation Between IShares MBS and First Trust

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

Diversification Opportunities for IShares MBS and First Trust

0.96

Correlation Coefficient

IShares MBS  First Trust

Almost no diversification

The 3 months correlation between IShares and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares MBS ETF and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and IShares MBS 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 MBS ETF 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 Exchange has no effect on the direction of IShares MBS i.e., IShares MBS and First Trust go up and down completely randomly.

Pair Corralation between IShares MBS and First Trust

Considering the 90-day investment horizon iShares MBS ETF is expected to generate 0.94 times more return on investment than First Trust. However, iShares MBS ETF is 1.07 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.09 per unit of risk. If you would invest  9,143  in iShares MBS ETF on May 5, 2025 and sell it today you would earn a total of  229.00  from holding iShares MBS ETF or generate 2.5% return on investment over 90 days.

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

iShares MBS ETF  vs.  First Trust Exchange Traded

iShares MBS ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MBS ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, IShares MBS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Trust Exchange

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares MBS and First Trust

The main advantage of trading using opposite IShares MBS and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MBS 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 MBS ETF and First Trust Exchange Traded 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..