Correlation Between Health Care and First Trust

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

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

Diversification Opportunities for Health Care and First Trust

0.0

Correlation Coefficient

Health Care  First Trust

Pay attention - limited upside

The 3 months correlation between Health and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Health Care 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 Health Care Ultrasector 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 Managed has no effect on the direction of Health Care i.e., Health Care and First Trust go up and down completely randomly.

Pair Corralation between Health Care and First Trust

If you would invest  0.00  in First Trust Managed on May 10, 2025 and sell it today you would earn a total of  0.00  from holding First Trust Managed or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Health Care Ultrasector  vs.  First Trust Managed

Health Care Ultrasector

Risk-Adjusted Performance

Weakest

Over the last 90 days Health Care Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

First Trust Managed

Risk-Adjusted Performance

Weak

Over the last 90 days First Trust Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Health Care and First Trust

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

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.