Correlation Between First Trust and Invesco Dynamic

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

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

Diversification Opportunities for First Trust and Invesco Dynamic

0.63

Correlation Coefficient

First Trust  Invesco Dynamic

Poor diversification

The 3 months correlation between First and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and Invesco Dynamic Building in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Building 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 S Network are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Building has no effect on the direction of First Trust i.e., First Trust and Invesco Dynamic go up and down completely randomly.

Pair Corralation between First Trust and Invesco Dynamic

Given the investment horizon of 90 days First Trust is expected to generate 7.96 times less return on investment than Invesco Dynamic. In addition to that, First Trust is 1.02 times more volatile than Invesco Dynamic Building. It trades about 0.01 of its total potential returns per unit of risk. Invesco Dynamic Building is currently generating about 0.09 per unit of volatility. If you would invest  7,003  in Invesco Dynamic Building on September 13, 2024 and sell it today you would earn a total of  1,263  from holding Invesco Dynamic Building or generate 18.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

First Trust S Network  vs.  Invesco Dynamic Building

First Trust S

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Dynamic Building

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Building are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Trust and Invesco Dynamic

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

The idea behind First Trust S Network and Invesco Dynamic Building 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.