Correlation Between IQ Healthy and First Trust

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

By analyzing existing cross correlation between IQ Healthy Hearts and First Trust Enhanced, you can compare the effects of market volatilities on IQ Healthy and First Trust 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 IQ Healthy with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQ Healthy and First Trust.

Diversification Opportunities for IQ Healthy and First Trust

-0.52

Correlation Coefficient

IQ Healthy  First Trust

Excellent diversification

The 3 months correlation between HART and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding IQ Healthy Hearts and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and IQ Healthy 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 IQ Healthy Hearts are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Enhanced has no effect on the direction of IQ Healthy i.e., IQ Healthy and First Trust go up and down completely randomly.

Pair Corralation between IQ Healthy and First Trust

Given the investment horizon of 90 days IQ Healthy Hearts is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, IQ Healthy Hearts is 1.11 times less risky than First Trust. The etf trades about -0.09 of its potential returns per unit of risk. The First Trust Enhanced is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,961  in First Trust Enhanced on September 2, 2024 and sell it today you would earn a total of  123.00  from holding First Trust Enhanced or generate 6.27% return on investment over 90 days.

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

IQ Healthy Hearts  vs.  First Trust Enhanced

IQ Healthy Hearts

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IQ Healthy and First Trust

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

The idea behind IQ Healthy Hearts and First Trust Enhanced 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.