Correlation Between First Trust and BlackRock Health

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

By analyzing existing cross correlation between First Trust Enhanced and BlackRock Health Sciences, you can compare the effects of market volatilities on First Trust and BlackRock Health 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 BlackRock Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BlackRock Health.

Diversification Opportunities for First Trust and BlackRock Health

-0.56

Correlation Coefficient

First Trust  BlackRock Health

Excellent diversification

The 3 months correlation between First and BlackRock is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and BlackRock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Health Sciences 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 Enhanced are associated (or correlated) with BlackRock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Health Sciences has no effect on the direction of First Trust i.e., First Trust and BlackRock Health go up and down completely randomly.

Pair Corralation between First Trust and BlackRock Health

Considering the 90-day investment horizon First Trust Enhanced is expected to generate 0.81 times more return on investment than BlackRock Health. However, First Trust Enhanced is 1.23 times less risky than BlackRock Health. It trades about 0.15 of its potential returns per unit of risk. BlackRock Health Sciences is currently generating about -0.15 per unit of risk. If you would invest  1,981  in First Trust Enhanced on September 14, 2024 and sell it today you would earn a total of  119.00  from holding First Trust Enhanced or generate 6.01% return on investment over 90 days.

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

First Trust Enhanced  vs.  BlackRock Health Sciences

First Trust Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BlackRock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Health Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with First Trust and BlackRock Health

The main advantage of trading using opposite First Trust and BlackRock Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BlackRock Health 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 BlackRock Health will offset losses from the drop in BlackRock Health's long position.

The idea behind First Trust Enhanced and BlackRock Health Sciences 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.