Correlation Between First Trust and Harvest Healthcare

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

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

Diversification Opportunities for First Trust and Harvest Healthcare

-0.78

Correlation Coefficient

First Trust  Harvest Healthcare

Pay attention - limited upside

The 3 months correlation between First and Harvest is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust AlphaDEX and Harvest Healthcare Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Healthcare 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 AlphaDEX are associated (or correlated) with Harvest Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Healthcare has no effect on the direction of First Trust i.e., First Trust and Harvest Healthcare go up and down completely randomly.

Pair Corralation between First Trust and Harvest Healthcare

Assuming the 90 days trading horizon First Trust AlphaDEX is expected to generate 1.22 times more return on investment than Harvest Healthcare. However, First Trust is 1.22 times more volatile than Harvest Healthcare Leaders. It trades about -0.04 of its potential returns per unit of risk. Harvest Healthcare Leaders is currently generating about -0.26 per unit of risk. If you would invest  10,506  in First Trust AlphaDEX on October 8, 2024 and sell it today you would lose (103.00) from holding First Trust AlphaDEX or give up 0.98% of portfolio value over 90 days.

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

First Trust AlphaDEX  vs.  Harvest Healthcare Leaders

First Trust AlphaDEX

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust AlphaDEX are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Harvest Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harvest Healthcare Leaders 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 Healthcare

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

The idea behind First Trust AlphaDEX and Harvest Healthcare Leaders 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.