Correlation Between Hydrogen Engine and First Trust

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

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

Diversification Opportunities for Hydrogen Engine and First Trust

0.04

Correlation Coefficient

Hydrogen Engine  First Trust

Significant diversification

The 3 months correlation between Hydrogen and First is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hydrogen Engine Center and First Trust EIP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust EIP and Hydrogen Engine 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 Hydrogen Engine Center 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 EIP has no effect on the direction of Hydrogen Engine i.e., Hydrogen Engine and First Trust go up and down completely randomly.

Pair Corralation between Hydrogen Engine and First Trust

Given the investment horizon of 90 days Hydrogen Engine Center is expected to generate 141.84 times more return on investment than First Trust. However, Hydrogen Engine is 141.84 times more volatile than First Trust EIP. It trades about 0.15 of its potential returns per unit of risk. First Trust EIP is currently generating about 0.08 per unit of risk. If you would invest  0.60  in Hydrogen Engine Center on October 27, 2024 and sell it today you would earn a total of  0.75  from holding Hydrogen Engine Center or generate 125.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Hydrogen Engine Center  vs.  First Trust EIP

Hydrogen Engine Center

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrogen Engine Center are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hydrogen Engine reported solid returns over the last few months and may actually be approaching a breakup point.

First Trust EIP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust EIP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hydrogen Engine and First Trust

The main advantage of trading using opposite Hydrogen Engine and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hydrogen Engine 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 Hydrogen Engine Center and First Trust EIP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.