Correlation Between First Trust and Hydrogen Engine

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

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

Diversification Opportunities for First Trust and Hydrogen Engine

0.04

Correlation Coefficient

First Trust  Hydrogen Engine

Significant diversification

The 3 months correlation between First and Hydrogen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust EIP and Hydrogen Engine Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrogen Engine Center 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 EIP are associated (or correlated) with Hydrogen Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrogen Engine Center has no effect on the direction of First Trust i.e., First Trust and Hydrogen Engine go up and down completely randomly.

Pair Corralation between First Trust and Hydrogen Engine

Given the investment horizon of 90 days First Trust is expected to generate 275.02 times less return on investment than Hydrogen Engine. But when comparing it to its historical volatility, First Trust EIP is 141.84 times less risky than Hydrogen Engine. It trades about 0.08 of its potential returns per unit of risk. Hydrogen Engine Center is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Hydrogen Engine Center on October 27, 2024 and sell it today you would earn a total of  0.75  from holding Hydrogen Engine Center or generate 125.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

First Trust EIP  vs.  Hydrogen Engine Center

First Trust EIP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust EIP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hydrogen Engine Center

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrogen Engine Center are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hydrogen Engine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Hydrogen Engine

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

The idea behind First Trust EIP and Hydrogen Engine Center 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.