Correlation Between First Trust and Hartford Municipal

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

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

Diversification Opportunities for First Trust and Hartford Municipal

0.86

Correlation Coefficient

First Trust  Hartford Municipal

Very poor diversification

The 3 months correlation between First and Hartford is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Municipal and Hartford Municipal Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Municipal 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 Municipal are associated (or correlated) with Hartford Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Municipal has no effect on the direction of First Trust i.e., First Trust and Hartford Municipal go up and down completely randomly.

Pair Corralation between First Trust and Hartford Municipal

Given the investment horizon of 90 days First Trust Municipal is expected to generate 1.1 times more return on investment than Hartford Municipal. However, First Trust is 1.1 times more volatile than Hartford Municipal Opportunities. It trades about -0.04 of its potential returns per unit of risk. Hartford Municipal Opportunities is currently generating about -0.09 per unit of risk. If you would invest  4,873  in First Trust Municipal on September 21, 2024 and sell it today you would lose (40.00) from holding First Trust Municipal or give up 0.82% of portfolio value over 90 days.

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

First Trust Municipal  vs.  Hartford Municipal Opportuniti

First Trust Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hartford Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and Hartford Municipal

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

The idea behind First Trust Municipal and Hartford Municipal Opportunities 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 Commodity Directory module to find actively traded commodities issued by global exchanges.