Correlation Between First Trust and Horizon Esg

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

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

Diversification Opportunities for First Trust and Horizon Esg

0.77

Correlation Coefficient

First Trust  Horizon Esg

Poor diversification

The 3 months correlation between First and Horizon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Horizon Esg Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Esg Defensive 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 Specialty are associated (or correlated) with Horizon Esg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Esg Defensive has no effect on the direction of First Trust i.e., First Trust and Horizon Esg go up and down completely randomly.

Pair Corralation between First Trust and Horizon Esg

Considering the 90-day investment horizon First Trust is expected to generate 1.01 times less return on investment than Horizon Esg. In addition to that, First Trust is 1.07 times more volatile than Horizon Esg Defensive. It trades about 0.15 of its total potential returns per unit of risk. Horizon Esg Defensive is currently generating about 0.16 per unit of volatility. If you would invest  4,282  in Horizon Esg Defensive on September 13, 2024 and sell it today you would earn a total of  326.00  from holding Horizon Esg Defensive or generate 7.61% return on investment over 90 days.

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

First Trust Specialty  vs.  Horizon Esg Defensive

First Trust Specialty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Specialty are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Horizon Esg Defensive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Esg Defensive are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Horizon Esg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Trust and Horizon Esg

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

The idea behind First Trust Specialty and Horizon Esg Defensive 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.