Correlation Between Hartford Short and First Trust

Can any of the company-specific risk be diversified away by investing in both Hartford Short 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 Short 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 Short Duration and First Trust Short, you can compare the effects of market volatilities on Hartford Short 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 Short with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Short and First Trust.

Diversification Opportunities for Hartford Short and First Trust

0.79

Correlation Coefficient

Hartford Short  First Trust

Poor diversification

The 3 months correlation between Hartford and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Short Duration 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 Short 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 Short Duration 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 Short i.e., Hartford Short and First Trust go up and down completely randomly.

Pair Corralation between Hartford Short and First Trust

Given the investment horizon of 90 days Hartford Short is expected to generate 1.23 times less return on investment than First Trust. In addition to that, Hartford Short is 1.17 times more volatile than First Trust Short. It trades about 0.13 of its total potential returns per unit of risk. First Trust Short is currently generating about 0.19 per unit of volatility. If you would invest  1,972  in First Trust Short on December 20, 2024 and sell it today you would earn a total of  22.00  from holding First Trust Short or generate 1.12% return on investment over 90 days.

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

Hartford Short Duration  vs.  First Trust Short

Hartford Short Duration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Short Duration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hartford Short is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. 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 Short and First Trust

The main advantage of trading using opposite Hartford Short and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Short 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 Short Duration 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 Transaction History module to view history of all your transactions and understand their impact on performance.