Correlation Between First Trust and Harbor All

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

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

Diversification Opportunities for First Trust and Harbor All

-0.35

Correlation Coefficient

First Trust  Harbor All

Very good diversification

The 3 months correlation between First and Harbor is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Capital and Harbor All Weather Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor All Weather 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 Capital are associated (or correlated) with Harbor All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor All Weather has no effect on the direction of First Trust i.e., First Trust and Harbor All go up and down completely randomly.

Pair Corralation between First Trust and Harbor All

Given the investment horizon of 90 days First Trust Capital is expected to under-perform the Harbor All. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Capital is 1.02 times less risky than Harbor All. The etf trades about -0.4 of its potential returns per unit of risk. The Harbor All Weather Inflation is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,174  in Harbor All Weather Inflation on October 6, 2024 and sell it today you would earn a total of  51.00  from holding Harbor All Weather Inflation or generate 2.35% return on investment over 90 days.

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

First Trust Capital  vs.  Harbor All Weather Inflation

First Trust Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Harbor All Weather

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor All Weather Inflation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Harbor All is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Harbor All

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

The idea behind First Trust Capital and Harbor All Weather Inflation 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.