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 Tax and First Trust Intermediate, 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

0.32

Correlation Coefficient

Eaton Vance  First Trust

Weak diversification

The 3 months correlation between Eaton and First is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Tax and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate 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 Tax 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 Intermediate 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 Tax is expected to generate 1.32 times more return on investment than First Trust. However, Eaton Vance is 1.32 times more volatile than First Trust Intermediate. It trades about -0.12 of its potential returns per unit of risk. First Trust Intermediate is currently generating about -0.33 per unit of risk. If you would invest  2,581  in Eaton Vance Tax on September 24, 2024 and sell it today you would lose (48.00) from holding Eaton Vance Tax or give up 1.86% of portfolio value over 90 days.

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

Eaton Vance Tax  vs.  First Trust Intermediate

Eaton Vance Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Tax has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Eaton Vance is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Trust Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Intermediate has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Tax and First Trust Intermediate 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.