Correlation Between Invesco CurrencyShares and First Trust

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

By analyzing existing cross correlation between Invesco CurrencyShares Japanese and First Trust Exchange, you can compare the effects of market volatilities on Invesco CurrencyShares and First Trust 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 Invesco CurrencyShares with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and First Trust.

Diversification Opportunities for Invesco CurrencyShares and First Trust

-0.65

Correlation Coefficient

Invesco CurrencyShares  First Trust

Excellent diversification

The 3 months correlation between Invesco and First is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and First Trust Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Invesco CurrencyShares 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 Invesco CurrencyShares Japanese are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and First Trust go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and First Trust

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the First Trust. In addition to that, Invesco CurrencyShares is 3.5 times more volatile than First Trust Exchange. It trades about -0.13 of its total potential returns per unit of risk. First Trust Exchange is currently generating about 0.2 per unit of volatility. If you would invest  3,553  in First Trust Exchange on October 9, 2024 and sell it today you would earn a total of  79.00  from holding First Trust Exchange or generate 2.22% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  First Trust Exchange

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust Exchange

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Invesco CurrencyShares and First Trust

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

The idea behind Invesco CurrencyShares Japanese and First Trust Exchange 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.