Correlation Between Harvest Healthcare and FT AlphaDEX

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

By analyzing existing cross correlation between Harvest Healthcare Leaders and FT AlphaDEX Industrials, you can compare the effects of market volatilities on Harvest Healthcare and FT AlphaDEX 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 Harvest Healthcare with a short position of FT AlphaDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harvest Healthcare and FT AlphaDEX.

Diversification Opportunities for Harvest Healthcare and FT AlphaDEX

-0.16

Correlation Coefficient

Harvest Healthcare  FT AlphaDEX

Good diversification

The 3 months correlation between Harvest and FHG is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Harvest Healthcare Leaders and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials and Harvest Healthcare 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 Harvest Healthcare Leaders are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of Harvest Healthcare i.e., Harvest Healthcare and FT AlphaDEX go up and down completely randomly.

Pair Corralation between Harvest Healthcare and FT AlphaDEX

Assuming the 90 days trading horizon Harvest Healthcare Leaders is expected to generate 0.65 times more return on investment than FT AlphaDEX. However, Harvest Healthcare Leaders is 1.55 times less risky than FT AlphaDEX. It trades about 0.11 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about -0.07 per unit of risk. If you would invest  754.00  in Harvest Healthcare Leaders on December 29, 2024 and sell it today you would earn a total of  38.00  from holding Harvest Healthcare Leaders or generate 5.04% return on investment over 90 days.

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

Harvest Healthcare Leaders  vs.  FT AlphaDEX Industrials

Harvest Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Healthcare Leaders are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Harvest Healthcare is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

FT AlphaDEX Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT AlphaDEX Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, FT AlphaDEX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Harvest Healthcare and FT AlphaDEX

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

The idea behind Harvest Healthcare Leaders and FT AlphaDEX Industrials 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.