Correlation Between First Trust and Invesco MSCI

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

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

Diversification Opportunities for First Trust and Invesco MSCI

0.73

Correlation Coefficient

First Trust  Invesco MSCI

Poor diversification

The 3 months correlation between First and Invesco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Materials and Invesco MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Global 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 Materials are associated (or correlated) with Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI Global has no effect on the direction of First Trust i.e., First Trust and Invesco MSCI go up and down completely randomly.

Pair Corralation between First Trust and Invesco MSCI

Considering the 90-day investment horizon First Trust Materials is expected to under-perform the Invesco MSCI. In addition to that, First Trust is 1.32 times more volatile than Invesco MSCI Global. It trades about 0.0 of its total potential returns per unit of risk. Invesco MSCI Global is currently generating about 0.02 per unit of volatility. If you would invest  3,006  in Invesco MSCI Global on September 25, 2024 and sell it today you would earn a total of  227.00  from holding Invesco MSCI Global or generate 7.55% return on investment over 90 days.

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

First Trust Materials  vs.  Invesco MSCI Global

First Trust Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Invesco MSCI Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with First Trust and Invesco MSCI

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

The idea behind First Trust Materials and Invesco MSCI Global 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.