Correlation Between First Trust and Even Herd

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

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

Diversification Opportunities for First Trust and Even Herd

0.91

Correlation Coefficient

First Trust  Even Herd

Almost no diversification

The 3 months correlation between First and Even is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and Even Herd Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Even Herd Long 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 LongShort are associated (or correlated) with Even Herd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Even Herd Long has no effect on the direction of First Trust i.e., First Trust and Even Herd go up and down completely randomly.

Pair Corralation between First Trust and Even Herd

Given the investment horizon of 90 days First Trust is expected to generate 2.93 times less return on investment than Even Herd. But when comparing it to its historical volatility, First Trust LongShort is 1.5 times less risky than Even Herd. It trades about 0.11 of its potential returns per unit of risk. Even Herd Long is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,060  in Even Herd Long on August 30, 2024 and sell it today you would earn a total of  259.50  from holding Even Herd Long or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

First Trust LongShort  vs.  Even Herd Long

First Trust LongShort

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential 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.

Even Herd Long

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Even Herd Long are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Even Herd may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Trust and Even Herd

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

The idea behind First Trust LongShort and Even Herd Long 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.