Correlation Between First Trust and Hartford Municipal
Can any of the company-specific risk be diversified away by investing in both First Trust and Hartford Municipal 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 Hartford Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Short and Hartford Municipal Opportunities, you can compare the effects of market volatilities on First Trust and Hartford Municipal 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 Hartford Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Hartford Municipal.
Diversification Opportunities for First Trust and Hartford Municipal
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Hartford is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Short and Hartford Municipal Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Municipal 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 Short are associated (or correlated) with Hartford Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Municipal has no effect on the direction of First Trust i.e., First Trust and Hartford Municipal go up and down completely randomly.
Pair Corralation between First Trust and Hartford Municipal
Given the investment horizon of 90 days First Trust is expected to generate 3.28 times less return on investment than Hartford Municipal. But when comparing it to its historical volatility, First Trust Short is 2.37 times less risky than Hartford Municipal. It trades about 0.13 of its potential returns per unit of risk. Hartford Municipal Opportunities is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,873 in Hartford Municipal Opportunities on September 2, 2024 and sell it today you would earn a total of 51.00 from holding Hartford Municipal Opportunities or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Short vs. Hartford Municipal Opportuniti
Performance |
| Timeline |
| First Trust Short |
| Hartford Municipal |
First Trust and Hartford Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Hartford Municipal
The main advantage of trading using opposite First Trust and Hartford Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Hartford Municipal 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 Hartford Municipal will offset losses from the drop in Hartford Municipal's long position.| First Trust vs. First Trust Ultra | First Trust vs. First Trust Municipal | First Trust vs. First Trust Managed | First Trust vs. First Trust Institutional |
| Hartford Municipal vs. IQ MacKay Municipal | Hartford Municipal vs. IQ MacKay Municipal | Hartford Municipal vs. Franklin Liberty Federal | Hartford Municipal vs. Franklin Liberty Intermediate |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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