Correlation Between Invesco and First Trust

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

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

Diversification Opportunities for Invesco and First Trust

0.0

Correlation Coefficient

Invesco  First Trust

Pay attention - limited upside

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

Pair Corralation between Invesco and First Trust

If you would invest  10,315  in First Trust Equity on December 4, 2024 and sell it today you would earn a total of  1,615  from holding First Trust Equity or generate 15.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Invesco  vs.  First Trust Equity

Invesco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Invesco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Invesco and First Trust

The main advantage of trading using opposite Invesco and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco 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 Invesco and First Trust Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.