Correlation Between First Trust and Invesco Dynamic

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

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

Diversification Opportunities for First Trust and Invesco Dynamic

0.91

Correlation Coefficient

First Trust  Invesco Dynamic

Almost no diversification

The 3 months correlation between First and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Invesco Dynamic Semiconductors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Semi 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 Nasdaq are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Semi has no effect on the direction of First Trust i.e., First Trust and Invesco Dynamic go up and down completely randomly.

Pair Corralation between First Trust and Invesco Dynamic

Given the investment horizon of 90 days First Trust Nasdaq is expected to under-perform the Invesco Dynamic. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Nasdaq is 1.96 times less risky than Invesco Dynamic. The etf trades about -0.15 of its potential returns per unit of risk. The Invesco Dynamic Semiconductors is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,792  in Invesco Dynamic Semiconductors on December 20, 2024 and sell it today you would lose (573.00) from holding Invesco Dynamic Semiconductors or give up 9.89% 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 Nasdaq  vs.  Invesco Dynamic Semiconductors

First Trust Nasdaq

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Invesco Dynamic Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Dynamic Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with First Trust and Invesco Dynamic

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

The idea behind First Trust Nasdaq and Invesco Dynamic Semiconductors 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.