Correlation Between Tekla Healthcare and First Trust
Can any of the company-specific risk be diversified away by investing in both Tekla Healthcare 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 Tekla Healthcare and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tekla Healthcare Investors and First Trust Intermediate, you can compare the effects of market volatilities on Tekla Healthcare 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 Tekla Healthcare with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and First Trust.
Diversification Opportunities for Tekla Healthcare and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tekla and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors 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 Tekla Healthcare 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 Tekla Healthcare Investors 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 Tekla Healthcare i.e., Tekla Healthcare and First Trust go up and down completely randomly.
Pair Corralation between Tekla Healthcare and First Trust
Considering the 90-day investment horizon Tekla Healthcare Investors is expected to under-perform the First Trust. In addition to that, Tekla Healthcare is 2.14 times more volatile than First Trust Intermediate. It trades about -0.01 of its total potential returns per unit of risk. First Trust Intermediate is currently generating about 0.23 per unit of volatility. If you would invest 1,842 in First Trust Intermediate on November 28, 2024 and sell it today you would earn a total of 39.00 from holding First Trust Intermediate or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Tekla Healthcare Investors vs. First Trust Intermediate
Performance |
| Timeline |
| Tekla Healthcare Inv |
| First Trust Intermediate |
Tekla Healthcare and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tekla Healthcare and First Trust
The main advantage of trading using opposite Tekla Healthcare and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tekla Healthcare 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.| Tekla Healthcare vs. Tekla Healthcare Opportunities | Tekla Healthcare vs. Eaton Vance Tax | Tekla Healthcare vs. Tekla World Healthcare | Tekla Healthcare vs. Cohen Steers Limited |
| First Trust vs. RiverNorth Flexible Municipalome | First Trust vs. DWS Municipal Income | First Trust vs. Blackrock Munivest | First Trust vs. MFS Municipal Income |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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