Correlation Between First Trust and Invesco Zacks

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

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

Diversification Opportunities for First Trust and Invesco Zacks

0.34

Correlation Coefficient

First Trust  Invesco Zacks

Weak diversification

The 3 months correlation between First and Invesco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and Invesco Zacks Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Zacks Multi 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 Multi Asset are associated (or correlated) with Invesco Zacks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Zacks Multi has no effect on the direction of First Trust i.e., First Trust and Invesco Zacks go up and down completely randomly.

Pair Corralation between First Trust and Invesco Zacks

Given the investment horizon of 90 days First Trust Multi Asset is expected to generate 0.67 times more return on investment than Invesco Zacks. However, First Trust Multi Asset is 1.5 times less risky than Invesco Zacks. It trades about 0.1 of its potential returns per unit of risk. Invesco Zacks Multi Asset is currently generating about 0.05 per unit of risk. If you would invest  1,580  in First Trust Multi Asset on December 28, 2024 and sell it today you would earn a total of  51.00  from holding First Trust Multi Asset or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

First Trust Multi Asset  vs.  Invesco Zacks Multi Asset

First Trust Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Invesco Zacks Multi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Zacks Multi Asset are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco Zacks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Invesco Zacks

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

The idea behind First Trust Multi Asset and Invesco Zacks Multi Asset 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.