Correlation Between GraniteShares HIPS and First Trust

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

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

Diversification Opportunities for GraniteShares HIPS and First Trust

0.59

Correlation Coefficient

GraniteShares HIPS  First Trust

Very weak diversification

The 3 months correlation between GraniteShares and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares HIPS High and First Trust Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Income and GraniteShares HIPS 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 GraniteShares HIPS High 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 Income has no effect on the direction of GraniteShares HIPS i.e., GraniteShares HIPS and First Trust go up and down completely randomly.

Pair Corralation between GraniteShares HIPS and First Trust

Given the investment horizon of 90 days GraniteShares HIPS High is expected to generate 1.03 times more return on investment than First Trust. However, GraniteShares HIPS is 1.03 times more volatile than First Trust Income. It trades about 0.0 of its potential returns per unit of risk. First Trust Income is currently generating about -0.07 per unit of risk. If you would invest  1,280  in GraniteShares HIPS High on October 10, 2024 and sell it today you would lose (1.00) from holding GraniteShares HIPS High or give up 0.08% of portfolio value over 90 days.

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

GraniteShares HIPS High  vs.  First Trust Income

GraniteShares HIPS High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares HIPS High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GraniteShares HIPS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GraniteShares HIPS and First Trust

The main advantage of trading using opposite GraniteShares HIPS and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares HIPS 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 GraniteShares HIPS High and First Trust Income 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 Global Correlations module to find global opportunities by holding instruments from different markets.