Correlation Between Flaherty and First Trust
Can any of the company-specific risk be diversified away by investing in both Flaherty 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 Flaherty and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flaherty and Crumrine and First Trust Intermediate, you can compare the effects of market volatilities on Flaherty 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 Flaherty with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flaherty and First Trust.
Diversification Opportunities for Flaherty and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Flaherty and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Flaherty and Crumrine and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate and Flaherty 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 Flaherty and Crumrine 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 Intermediate has no effect on the direction of Flaherty i.e., Flaherty and First Trust go up and down completely randomly.
Pair Corralation between Flaherty and First Trust
Considering the 90-day investment horizon Flaherty is expected to generate 1.01 times less return on investment than First Trust. In addition to that, Flaherty is 1.24 times more volatile than First Trust Intermediate. It trades about 0.12 of its total potential returns per unit of risk. First Trust Intermediate is currently generating about 0.15 per unit of volatility. If you would invest 1,850 in First Trust Intermediate on August 30, 2024 and sell it today you would earn a total of 30.00 from holding First Trust Intermediate or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flaherty and Crumrine vs. First Trust Intermediate
Performance |
| Timeline |
| Flaherty and Crumrine |
| First Trust Intermediate |
Flaherty and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flaherty and First Trust
The main advantage of trading using opposite Flaherty and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flaherty 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.| Flaherty vs. Tekla World Healthcare | Flaherty vs. Tekla Healthcare Investors | Flaherty vs. Tekla Life Sciences | Flaherty vs. Cohen And Steers |
| First Trust vs. Tekla Healthcare Investors | First Trust vs. Tekla Healthcare Opportunities | First Trust vs. Eaton Vance Tax | First Trust vs. Tekla World Healthcare |
Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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