Correlation Between First Trust and High Liner
Can any of the company-specific risk be diversified away by investing in both First Trust and High Liner 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 High Liner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and High Liner Foods, you can compare the effects of market volatilities on First Trust and High Liner 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 High Liner. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and High Liner.
Diversification Opportunities for First Trust and High Liner
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and High is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods 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 Indxx are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of First Trust i.e., First Trust and High Liner go up and down completely randomly.
Pair Corralation between First Trust and High Liner
Assuming the 90 days trading horizon First Trust is expected to generate 5.88 times less return on investment than High Liner. But when comparing it to its historical volatility, First Trust Indxx is 4.47 times less risky than High Liner. It trades about 0.16 of its potential returns per unit of risk. High Liner Foods is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,296 in High Liner Foods on September 12, 2024 and sell it today you would earn a total of 282.00 from holding High Liner Foods or generate 21.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Indxx vs. High Liner Foods
Performance |
Timeline |
First Trust Indxx |
High Liner Foods |
First Trust and High Liner Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and High Liner
The main advantage of trading using opposite First Trust and High Liner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, High Liner 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 High Liner will offset losses from the drop in High Liner's long position.First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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