Correlation Between First Trust and CBH

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

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

Diversification Opportunities for First Trust and CBH

-0.74

Correlation Coefficient

First Trust  CBH

Pay attention - limited upside

The 3 months correlation between First and CBH is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intermediate and CBH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBH 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 Intermediate are associated (or correlated) with CBH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBH has no effect on the direction of First Trust i.e., First Trust and CBH go up and down completely randomly.

Pair Corralation between First Trust and CBH

Considering the 90-day investment horizon First Trust Intermediate is expected to generate 1.66 times more return on investment than CBH. However, First Trust is 1.66 times more volatile than CBH. It trades about 0.05 of its potential returns per unit of risk. CBH is currently generating about 0.06 per unit of risk. If you would invest  1,460  in First Trust Intermediate on September 26, 2024 and sell it today you would earn a total of  347.00  from holding First Trust Intermediate or generate 23.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.07%
Values	Daily Returns

First Trust Intermediate  vs.  CBH

First Trust Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

CBH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, CBH is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Trust and CBH

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

The idea behind First Trust Intermediate and CBH 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.