Correlation Between First Trust and Invesco Pennsylvania

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

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

Diversification Opportunities for First Trust and Invesco Pennsylvania

0.5

Correlation Coefficient

First Trust  Invesco Pennsylvania

Very weak diversification

The 3 months correlation between First and Invesco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Invesco Pennsylvania Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Pennsylvania 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 Senior are associated (or correlated) with Invesco Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Pennsylvania has no effect on the direction of First Trust i.e., First Trust and Invesco Pennsylvania go up and down completely randomly.

Pair Corralation between First Trust and Invesco Pennsylvania

Considering the 90-day investment horizon First Trust is expected to generate 1.08 times less return on investment than Invesco Pennsylvania. But when comparing it to its historical volatility, First Trust Senior is 1.29 times less risky than Invesco Pennsylvania. It trades about 0.02 of its potential returns per unit of risk. Invesco Pennsylvania Value is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,015  in Invesco Pennsylvania Value on December 27, 2024 and sell it today you would earn a total of  4.00  from holding Invesco Pennsylvania Value or generate 0.39% return on investment over 90 days.

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

First Trust Senior  vs.  Invesco Pennsylvania Value

First Trust Senior

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Pennsylvania

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Pennsylvania Value are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Pennsylvania is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and Invesco Pennsylvania

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

The idea behind First Trust Senior and Invesco Pennsylvania Value 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.