Correlation Between First Trust and Hennessy Large
Can any of the company-specific risk be diversified away by investing in both First Trust and Hennessy Large 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 First Trust and Hennessy Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Hennessy Large Cap, you can compare the effects of market volatilities on First Trust and Hennessy Large 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 First Trust with a short position of Hennessy Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Hennessy Large.
Diversification Opportunities for First Trust and Hennessy Large
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Hennessy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Hennessy Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Large Cap and First Trust 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 First Trust Specialty are associated (or correlated) with Hennessy Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Large Cap has no effect on the direction of First Trust i.e., First Trust and Hennessy Large go up and down completely randomly.
Pair Corralation between First Trust and Hennessy Large
Considering the 90-day investment horizon First Trust Specialty is expected to generate 1.17 times more return on investment than Hennessy Large. However, First Trust is 1.17 times more volatile than Hennessy Large Cap. It trades about 0.08 of its potential returns per unit of risk. Hennessy Large Cap is currently generating about -0.2 per unit of risk. If you would invest 440.00 in First Trust Specialty on November 27, 2024 and sell it today you would earn a total of 8.00 from holding First Trust Specialty or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. Hennessy Large Cap
Performance |
| Timeline |
| First Trust Specialty |
| Hennessy Large Cap |
First Trust and Hennessy Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Hennessy Large
The main advantage of trading using opposite First Trust and Hennessy Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Hennessy Large 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 Hennessy Large will offset losses from the drop in Hennessy Large's long position.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
| Hennessy Large vs. Hennessy Large Cap | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. T Rowe Price |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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