Correlation Between First Trust and Invesco Nasdaq

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

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

Diversification Opportunities for First Trust and Invesco Nasdaq

-0.23

Correlation Coefficient

First Trust  Invesco Nasdaq

Very good diversification

The 3 months correlation between First and Invesco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Invesco Nasdaq Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Nasdaq Biote 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 Nasdaq are associated (or correlated) with Invesco Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Nasdaq Biote has no effect on the direction of First Trust i.e., First Trust and Invesco Nasdaq go up and down completely randomly.

Pair Corralation between First Trust and Invesco Nasdaq

Considering the 90-day investment horizon First Trust Nasdaq is expected to generate 1.31 times more return on investment than Invesco Nasdaq. However, First Trust is 1.31 times more volatile than Invesco Nasdaq Biotechnology. It trades about 0.01 of its potential returns per unit of risk. Invesco Nasdaq Biotechnology is currently generating about 0.01 per unit of risk. If you would invest  1,692  in First Trust Nasdaq on October 8, 2024 and sell it today you would earn a total of  55.00  from holding First Trust Nasdaq or generate 3.25% return on investment over 90 days.

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

First Trust Nasdaq  vs.  Invesco Nasdaq Biotechnology

First Trust Nasdaq

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Invesco Nasdaq Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Nasdaq Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with First Trust and Invesco Nasdaq

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

The idea behind First Trust Nasdaq and Invesco Nasdaq Biotechnology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.