Correlation Between First Trust and Invesco Dividend

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Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Dividend 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 Dividend 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 Dividend Achievers, you can compare the effects of market volatilities on First Trust and Invesco Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Dividend.

Diversification Opportunities for First Trust and Invesco Dividend

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Invesco is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow and Invesco Dividend Achievers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dividend Ach 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dividend Ach has no effect on the direction of First Trust i.e., First Trust and Invesco Dividend go up and down completely randomly.

Pair Corralation between First Trust and Invesco Dividend

Considering the 90-day investment horizon First Trust Dow is expected to under-perform the Invesco Dividend. In addition to that, First Trust is 1.45 times more volatile than Invesco Dividend Achievers. It trades about -0.33 of its total potential returns per unit of risk. Invesco Dividend Achievers is currently generating about 0.06 per unit of volatility. If you would invest  4,691  in Invesco Dividend Achievers on September 19, 2024 and sell it today you would earn a total of  26.00  from holding Invesco Dividend Achievers or generate 0.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Trust Dow  vs.  Invesco Dividend Achievers

 Performance 
       Timeline  
First Trust Dow 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 Dividend Ach 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dividend Achievers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Invesco Dividend is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Trust and Invesco Dividend Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Invesco Dividend

The main advantage of trading using opposite First Trust and Invesco Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Dividend 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 Dividend will offset losses from the drop in Invesco Dividend's long position.
The idea behind First Trust Dow and Invesco Dividend Achievers 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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