Correlation Between First Trust and Invesco High

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

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

Diversification Opportunities for First Trust and Invesco High

-0.28

Correlation Coefficient

First Trust  Invesco High

Very good diversification

The 3 months correlation between First and Invesco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and Invesco High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Yield 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 Dow are associated (or correlated) with Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Yield has no effect on the direction of First Trust i.e., First Trust and Invesco High go up and down completely randomly.

Pair Corralation between First Trust and Invesco High

Considering the 90-day investment horizon First Trust Dow is expected to under-perform the Invesco High. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Dow is 1.32 times less risky than Invesco High. The etf trades about -0.33 of its potential returns per unit of risk. The Invesco High Yield is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,221  in Invesco High Yield on September 19, 2024 and sell it today you would lose (59.00) from holding Invesco High Yield or give up 2.66% of portfolio value over 90 days.

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

First Trust Dow  vs.  Invesco High Yield

First Trust Dow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Dow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco High Yield

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Invesco High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Invesco High is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Invesco High

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

The idea behind First Trust Dow and Invesco High Yield 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.