Correlation Between FFHG and First Trust

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

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

Diversification Opportunities for FFHG and First Trust

0.83

Correlation Coefficient

FFHG  First Trust

Very poor diversification

The 3 months correlation between FFHG and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding FFHG and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort and FFHG 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 FFHG 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 LongShort has no effect on the direction of FFHG i.e., FFHG and First Trust go up and down completely randomly.

Pair Corralation between FFHG and First Trust

If you would invest  6,272  in First Trust LongShort on September 17, 2024 and sell it today you would earn a total of  418.00  from holding First Trust LongShort or generate 6.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

FFHG  vs.  First Trust LongShort

FFHG

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust LongShort

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FFHG and First Trust

The main advantage of trading using opposite FFHG and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FFHG 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 FFHG and First Trust LongShort 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.