Correlation Between CHIH and First Trust

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

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

Diversification Opportunities for CHIH and First Trust

0.14

Correlation Coefficient

CHIH  First Trust

Average diversification

The 3 months correlation between CHIH and First is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CHIH and First Trust China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust China and CHIH 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 CHIH 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 China has no effect on the direction of CHIH i.e., CHIH and First Trust go up and down completely randomly.

Pair Corralation between CHIH and First Trust

If you would invest  1,822  in First Trust China on September 21, 2024 and sell it today you would earn a total of  180.00  from holding First Trust China or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

CHIH  vs.  First Trust China

CHIH

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust China

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust China are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CHIH and First Trust

The main advantage of trading using opposite CHIH and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIH 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 CHIH and First Trust China 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.