Correlation Between First Trust and HP

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both First Trust and HP 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 HP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Mid and HP Inc, you can compare the effects of market volatilities on First Trust and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and HP.

Diversification Opportunities for First Trust and HP

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between First and HP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mid and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 Mid are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of First Trust i.e., First Trust and HP go up and down completely randomly.

Pair Corralation between First Trust and HP

Considering the 90-day investment horizon First Trust Mid is expected to generate 0.77 times more return on investment than HP. However, First Trust Mid is 1.3 times less risky than HP. It trades about -0.07 of its potential returns per unit of risk. HP Inc is currently generating about -0.2 per unit of risk. If you would invest  5,261  in First Trust Mid on January 25, 2024 and sell it today you would lose (90.00) from holding First Trust Mid or give up 1.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

First Trust Mid  vs.  HP Inc

 Performance 
       Timeline  
First Trust Mid 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mid are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.
HP Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

First Trust and HP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and HP

The main advantage of trading using opposite First Trust and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, HP 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 HP will offset losses from the drop in HP's long position.
The idea behind First Trust Mid and HP Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

Other Complementary Tools

Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments