Correlation Between High Liner and First Trust
Can any of the company-specific risk be diversified away by investing in both High Liner 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 High Liner and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Liner Foods and First Trust Indxx, you can compare the effects of market volatilities on High Liner 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 High Liner with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Liner and First Trust.
Diversification Opportunities for High Liner and First Trust
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between High and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding High Liner Foods and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and High Liner 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 High Liner Foods 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 Indxx has no effect on the direction of High Liner i.e., High Liner and First Trust go up and down completely randomly.
Pair Corralation between High Liner and First Trust
Assuming the 90 days trading horizon High Liner Foods is expected to generate 4.47 times more return on investment than First Trust. However, High Liner is 4.47 times more volatile than First Trust Indxx. It trades about 0.21 of its potential returns per unit of risk. First Trust Indxx is currently generating about 0.16 per unit of risk. 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 |
High Liner Foods vs. First Trust Indxx
Performance |
| Timeline |
| High Liner Foods |
| First Trust Indxx |
High Liner and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Liner and First Trust
The main advantage of trading using opposite High Liner and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Liner 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.| High Liner vs. Leons Furniture Limited | High Liner vs. Autocanada | High Liner vs. Maple Leaf Foods | High Liner vs. Premium Brands Holdings |
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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