Correlation Between First Trust and Janus Henderson

Can any of the company-specific risk be diversified away by investing in both First Trust and Janus Henderson 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 Janus Henderson 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 Janus Henderson Small, you can compare the effects of market volatilities on First Trust and Janus Henderson 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 Janus Henderson. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Janus Henderson.

Diversification Opportunities for First Trust and Janus Henderson

0.98

Correlation Coefficient

First Trust  Janus Henderson

Almost no diversification

The 3 months correlation between First and Janus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mid and Janus Henderson Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Henderson Small 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 Janus Henderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Henderson Small has no effect on the direction of First Trust i.e., First Trust and Janus Henderson go up and down completely randomly.

Pair Corralation between First Trust and Janus Henderson

Considering the 90-day investment horizon First Trust is expected to generate 1.11 times less return on investment than Janus Henderson. But when comparing it to its historical volatility, First Trust Mid is 1.31 times less risky than Janus Henderson. It trades about 0.24 of its potential returns per unit of risk. Janus Henderson Small is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,186  in Janus Henderson Small on September 4, 2024 and sell it today you would earn a total of  1,118  from holding Janus Henderson Small or generate 18.07% return on investment over 90 days.

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

First Trust Mid  vs.  Janus Henderson Small

First Trust Mid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mid are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, First Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Janus Henderson Small

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Henderson Small are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, Janus Henderson disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Janus Henderson

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

The idea behind First Trust Mid and Janus Henderson Small 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.