Correlation Between Janus Henderson and First Trust

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

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

Diversification Opportunities for Janus Henderson and First Trust

0.96

Correlation Coefficient

Janus Henderson  First Trust

Almost no diversification

The 3 months correlation between Janus and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Janus Henderson SmallMid and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Janus Henderson 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 Janus Henderson SmallMid 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 Mid has no effect on the direction of Janus Henderson i.e., Janus Henderson and First Trust go up and down completely randomly.

Pair Corralation between Janus Henderson and First Trust

Given the investment horizon of 90 days Janus Henderson SmallMid is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Janus Henderson SmallMid is 1.26 times less risky than First Trust. The etf trades about -0.09 of its potential returns per unit of risk. The First Trust Mid is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  8,103  in First Trust Mid on December 27, 2024 and sell it today you would lose (448.00) from holding First Trust Mid or give up 5.53% of portfolio value over 90 days.

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

Janus Henderson SmallMid  vs.  First Trust Mid

Janus Henderson SmallMid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Janus Henderson SmallMid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

First Trust Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Janus Henderson and First Trust

The main advantage of trading using opposite Janus Henderson and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Janus Henderson 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 Janus Henderson SmallMid and First Trust Mid 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.