Correlation Between First Trust and HFXJ
Can any of the company-specific risk be diversified away by investing in both First Trust and HFXJ 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 HFXJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and HFXJ, you can compare the effects of market volatilities on First Trust and HFXJ 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 HFXJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and HFXJ.
Diversification Opportunities for First Trust and HFXJ
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and HFXJ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and HFXJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HFXJ 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 Japan are associated (or correlated) with HFXJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HFXJ has no effect on the direction of First Trust i.e., First Trust and HFXJ go up and down completely randomly.
Pair Corralation between First Trust and HFXJ
If you would invest 0.00 in HFXJ on January 25, 2024 and sell it today you would earn a total of 0.00 from holding HFXJ or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Japan vs. HFXJ
Performance |
| Timeline |
| First Trust Japan |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| HFXJ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Trust and HFXJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and HFXJ
The main advantage of trading using opposite First Trust and HFXJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, HFXJ 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 HFXJ will offset losses from the drop in HFXJ's long position.The idea behind First Trust Japan and HFXJ pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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