Correlation Between First Trust and Janus Henderson

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

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

Diversification Opportunities for First Trust and Janus Henderson

0.68

Correlation Coefficient

First Trust  Janus Henderson

Poor diversification

The 3 months correlation between First and Janus is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust International and Janus Henderson SmallMid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Henderson SmallMid 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 International are associated (or correlated) with Janus Henderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Henderson SmallMid has no effect on the direction of First Trust i.e., First Trust and Janus Henderson go up and down completely randomly.

Pair Corralation between First Trust and Janus Henderson

Given the investment horizon of 90 days First Trust is expected to generate 1.75 times less return on investment than Janus Henderson. But when comparing it to its historical volatility, First Trust International is 1.07 times less risky than Janus Henderson. It trades about 0.04 of its potential returns per unit of risk. Janus Henderson SmallMid is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,516  in Janus Henderson SmallMid on October 11, 2024 and sell it today you would earn a total of  2,072  from holding Janus Henderson SmallMid or generate 37.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

First Trust International  vs.  Janus Henderson SmallMid

First Trust International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Janus Henderson SmallMid

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Henderson SmallMid are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Janus Henderson is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Janus Henderson

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

The idea behind First Trust International and Janus Henderson SmallMid 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.