Correlation Between Hoya Capital and First Trust

Can any of the company-specific risk be diversified away by investing in both Hoya Capital 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 Hoya Capital and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Hoya Capital and First Trust SP, you can compare the effects of market volatilities on Hoya Capital 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 Hoya Capital with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hoya Capital and First Trust.

Diversification Opportunities for Hoya Capital and First Trust

0.36

Correlation Coefficient

Hoya Capital  First Trust

Weak diversification

The 3 months correlation between Hoya and First is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Hoya Capital and First Trust SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SP and Hoya Capital 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 The Hoya Capital 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 SP has no effect on the direction of Hoya Capital i.e., Hoya Capital and First Trust go up and down completely randomly.

Pair Corralation between Hoya Capital and First Trust

Given the investment horizon of 90 days The Hoya Capital is expected to generate 1.11 times more return on investment than First Trust. However, Hoya Capital is 1.11 times more volatile than First Trust SP. It trades about 0.05 of its potential returns per unit of risk. First Trust SP is currently generating about 0.0 per unit of risk. If you would invest  3,324  in The Hoya Capital on February 12, 2024 and sell it today you would earn a total of  1,096  from holding The Hoya Capital or generate 32.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Hoya Capital  vs.  First Trust SP

Hoya Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Hoya Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Hoya Capital is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

First Trust SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hoya Capital and First Trust

The main advantage of trading using opposite Hoya Capital and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hoya Capital 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.

The idea behind The Hoya Capital and First Trust SP 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.