Correlation Between First Trust and Invesco Financial

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

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

Diversification Opportunities for First Trust and Invesco Financial

0.68

Correlation Coefficient

First Trust  Invesco Financial

Poor diversification

The 3 months correlation between First and Invesco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and Invesco Financial Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Financial 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 Preferred are associated (or correlated) with Invesco Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Financial has no effect on the direction of First Trust i.e., First Trust and Invesco Financial go up and down completely randomly.

Pair Corralation between First Trust and Invesco Financial

Considering the 90-day investment horizon First Trust Preferred is expected to generate 0.6 times more return on investment than Invesco Financial. However, First Trust Preferred is 1.66 times less risky than Invesco Financial. It trades about 0.05 of its potential returns per unit of risk. Invesco Financial Preferred is currently generating about 0.01 per unit of risk. If you would invest  1,585  in First Trust Preferred on October 11, 2024 and sell it today you would earn a total of  183.00  from holding First Trust Preferred or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

First Trust Preferred  vs.  Invesco Financial Preferred

First Trust Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic 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 Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Trust and Invesco Financial

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

The idea behind First Trust Preferred and Invesco Financial Preferred 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.