Correlation Between IPath Series and First Trust
Can any of the company-specific risk be diversified away by investing in both IPath Series 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 IPath Series and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iPath Series B and First Trust Developed, you can compare the effects of market volatilities on IPath Series 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 IPath Series with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and First Trust.
Diversification Opportunities for IPath Series and First Trust
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IPath and First is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and First Trust Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Developed and IPath Series 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 iPath Series B 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 Developed has no effect on the direction of IPath Series i.e., IPath Series and First Trust go up and down completely randomly.
Pair Corralation between IPath Series and First Trust
Considering the 90-day investment horizon iPath Series B is expected to under-perform the First Trust. In addition to that, IPath Series is 4.78 times more volatile than First Trust Developed. It trades about -0.02 of its total potential returns per unit of risk. First Trust Developed is currently generating about 0.38 per unit of volatility. If you would invest 4,605 in First Trust Developed on March 23, 2025 and sell it today you would earn a total of 325.00 from holding First Trust Developed or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
iPath Series B vs. First Trust Developed
Performance |
| Timeline |
| iPath Series B |
| First Trust Developed |
IPath Series and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPath Series and First Trust
The main advantage of trading using opposite IPath Series and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPath Series 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.| IPath Series vs. ProShares Ultra VIX | IPath Series vs. ProShares Short VIX | IPath Series vs. ProShares UltraPro Short | IPath Series vs. iShares 20 Year |
| First Trust vs. First Trust Asia | First Trust vs. First Trust United | First Trust vs. First Trust Germany | First Trust vs. First Trust Japan |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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