Correlation Between LHA Market and First Trust
Can any of the company-specific risk be diversified away by investing in both LHA Market 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 LHA Market and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LHA Market State and First Trust Alternative, you can compare the effects of market volatilities on LHA Market 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 LHA Market with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of LHA Market and First Trust.
Diversification Opportunities for LHA Market and First Trust
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LHA and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LHA Market State and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and LHA Market 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 LHA Market State 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 Alternative has no effect on the direction of LHA Market i.e., LHA Market and First Trust go up and down completely randomly.
Pair Corralation between LHA Market and First Trust
Given the investment horizon of 90 days LHA Market State is expected to under-perform the First Trust. In addition to that, LHA Market is 1.2 times more volatile than First Trust Alternative. It trades about -0.11 of its total potential returns per unit of risk. First Trust Alternative is currently generating about -0.01 per unit of volatility. If you would invest 2,827 in First Trust Alternative on August 26, 2024 and sell it today you would lose (29.00) from holding First Trust Alternative or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LHA Market State vs. First Trust Alternative
Performance |
| Timeline |
| LHA Market State |
| First Trust Alternative |
LHA Market and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LHA Market and First Trust
The main advantage of trading using opposite LHA Market and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LHA Market 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.| LHA Market vs. ETF Series Solutions | LHA Market vs. Northern Lights | LHA Market vs. Innovator Nasdaq 100 Power | LHA Market vs. Tidal ETF Trust |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust SSI | 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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