Correlation Between First Trust and HDAW

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

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

Diversification Opportunities for First Trust and HDAW

0.0

Correlation Coefficient

First Trust  HDAW

Pay attention - limited upside

The 3 months correlation between First and HDAW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and HDAW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDAW 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 Dow are associated (or correlated) with HDAW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDAW has no effect on the direction of First Trust i.e., First Trust and HDAW go up and down completely randomly.

Pair Corralation between First Trust and HDAW

If you would invest  2,233  in First Trust Dow on December 26, 2024 and sell it today you would earn a total of  214.00  from holding First Trust Dow or generate 9.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Trust Dow  vs.  HDAW

First Trust Dow

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HDAW

Risk-Adjusted Performance

Very Weak

Over the last 90 days HDAW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, HDAW is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and HDAW

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

The idea behind First Trust Dow and HDAW 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.