Correlation Between First Trust and Harvest Clean

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

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

Diversification Opportunities for First Trust and Harvest Clean

-0.23

Correlation Coefficient

First Trust  Harvest Clean

Very good diversification

The 3 months correlation between First and Harvest is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Harvest Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Clean Energy 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 Nasdaq are associated (or correlated) with Harvest Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Clean Energy has no effect on the direction of First Trust i.e., First Trust and Harvest Clean go up and down completely randomly.

Pair Corralation between First Trust and Harvest Clean

Assuming the 90 days trading horizon First Trust Nasdaq is expected to generate 1.34 times more return on investment than Harvest Clean. However, First Trust is 1.34 times more volatile than Harvest Clean Energy. It trades about -0.02 of its potential returns per unit of risk. Harvest Clean Energy is currently generating about -0.04 per unit of risk. If you would invest  2,004  in First Trust Nasdaq on September 12, 2024 and sell it today you would lose (364.00) from holding First Trust Nasdaq or give up 18.16% of portfolio value over 90 days.

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

First Trust Nasdaq  vs.  Harvest Clean Energy

First Trust Nasdaq

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Harvest Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harvest Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with First Trust and Harvest Clean

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

The idea behind First Trust Nasdaq and Harvest Clean Energy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.