Correlation Between Hartford Municipal and First Trust

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

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

Diversification Opportunities for Hartford Municipal and First Trust

0.93

Correlation Coefficient

Hartford Municipal  First Trust

Almost no diversification

The 3 months correlation between Hartford and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Municipal Opportuniti and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Hartford Municipal 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 Hartford Municipal Opportunities 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 Short has no effect on the direction of Hartford Municipal i.e., Hartford Municipal and First Trust go up and down completely randomly.

Pair Corralation between Hartford Municipal and First Trust

Given the investment horizon of 90 days Hartford Municipal Opportunities is expected to under-perform the First Trust. In addition to that, Hartford Municipal is 2.37 times more volatile than First Trust Short. It trades about -0.3 of its total potential returns per unit of risk. First Trust Short is currently generating about -0.23 per unit of volatility. If you would invest  1,996  in First Trust Short on October 10, 2024 and sell it today you would lose (10.00) from holding First Trust Short or give up 0.5% of portfolio value over 90 days.

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

Hartford Municipal Opportuniti  vs.  First Trust Short

Hartford Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Municipal Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Hartford Municipal is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Short has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hartford Municipal and First Trust

The main advantage of trading using opposite Hartford Municipal and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Municipal 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 Hartford Municipal Opportunities and First Trust Short 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.