Correlation Between First Trust and GraniteShares HIPS

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

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

Diversification Opportunities for First Trust and GraniteShares HIPS

0.9

Correlation Coefficient

First Trust  GraniteShares HIPS

Almost no diversification

The 3 months correlation between First and GraniteShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Income and GraniteShares HIPS High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares HIPS High 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 Income are associated (or correlated) with GraniteShares HIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares HIPS High has no effect on the direction of First Trust i.e., First Trust and GraniteShares HIPS go up and down completely randomly.

Pair Corralation between First Trust and GraniteShares HIPS

Given the investment horizon of 90 days First Trust Income is expected to generate 0.84 times more return on investment than GraniteShares HIPS. However, First Trust Income is 1.19 times less risky than GraniteShares HIPS. It trades about 0.08 of its potential returns per unit of risk. GraniteShares HIPS High is currently generating about 0.07 per unit of risk. If you would invest  2,121  in First Trust Income on December 22, 2024 and sell it today you would earn a total of  53.00  from holding First Trust Income or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

First Trust Income  vs.  GraniteShares HIPS High

First Trust Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

GraniteShares HIPS High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares HIPS High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GraniteShares HIPS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and GraniteShares HIPS

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

The idea behind First Trust Income and GraniteShares HIPS High 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.