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 Growth and Invesco NASDAQ Future, 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

0.9

Correlation Coefficient

First Trust  Invesco NASDAQ

Almost no diversification

The 3 months correlation between First and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Growth and Invesco NASDAQ Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ Future 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 Growth 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 Future 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

Given the investment horizon of 90 days First Trust Growth is expected to generate 0.61 times more return on investment than Invesco NASDAQ. However, First Trust Growth is 1.64 times less risky than Invesco NASDAQ. It trades about -0.08 of its potential returns per unit of risk. Invesco NASDAQ Future is currently generating about -0.17 per unit of risk. If you would invest  3,139  in First Trust Growth on December 28, 2024 and sell it today you would lose (178.00) from holding First Trust Growth or give up 5.67% of portfolio value over 90 days.

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

First Trust Growth  vs.  Invesco NASDAQ Future

First Trust Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and 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 NASDAQ Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private 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 Growth and Invesco NASDAQ Future 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.