Correlation Between Eaton Vance and First Trust

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

By analyzing existing cross correlation between Eaton Vance Enhanced and First Trust Enhanced, you can compare the effects of market volatilities on Eaton Vance 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 Eaton Vance with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and First Trust.

Diversification Opportunities for Eaton Vance and First Trust

0.68

Correlation Coefficient

Eaton Vance  First Trust

Poor diversification

The 3 months correlation between Eaton and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Enhanced and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and Eaton Vance 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 Eaton Vance Enhanced 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 Enhanced has no effect on the direction of Eaton Vance i.e., Eaton Vance and First Trust go up and down completely randomly.

Pair Corralation between Eaton Vance and First Trust

Considering the 90-day investment horizon Eaton Vance Enhanced is expected to generate 1.48 times more return on investment than First Trust. However, Eaton Vance is 1.48 times more volatile than First Trust Enhanced. It trades about 0.01 of its potential returns per unit of risk. First Trust Enhanced is currently generating about -0.02 per unit of risk. If you would invest  2,314  in Eaton Vance Enhanced on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Eaton Vance Enhanced or generate 0.0% return on investment over 90 days.

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

Eaton Vance Enhanced  vs.  First Trust Enhanced

Eaton Vance Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eaton Vance Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and First Trust

The main advantage of trading using opposite Eaton Vance and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Enhanced and First Trust Enhanced 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.