Correlation Between First Trust and Harvest Tech

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

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

Diversification Opportunities for First Trust and Harvest Tech

0.86

Correlation Coefficient

First Trust  Harvest Tech

Very poor diversification

The 3 months correlation between First and Harvest is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Harvest Tech Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Tech Achievers 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 Senior are associated (or correlated) with Harvest Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Tech Achievers has no effect on the direction of First Trust i.e., First Trust and Harvest Tech go up and down completely randomly.

Pair Corralation between First Trust and Harvest Tech

Assuming the 90 days trading horizon First Trust Senior is expected to under-perform the Harvest Tech. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Senior is 1.58 times less risky than Harvest Tech. The etf trades about -0.15 of its potential returns per unit of risk. The Harvest Tech Achievers is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,960  in Harvest Tech Achievers on September 13, 2024 and sell it today you would lose (5.00) from holding Harvest Tech Achievers or give up 0.26% of portfolio value over 90 days.

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

First Trust Senior  vs.  Harvest Tech Achievers

First Trust Senior

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Tech Achievers

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Tech Achievers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Harvest Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Trust and Harvest Tech

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

The idea behind First Trust Senior and Harvest Tech Achievers 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.