Correlation Between Invesco Optimum and First Trust

Can any of the company-specific risk be diversified away by investing in both Invesco Optimum 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 Optimum 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 Optimum Yield and First Trust Global, you can compare the effects of market volatilities on Invesco Optimum 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 Optimum with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Optimum and First Trust.

Diversification Opportunities for Invesco Optimum and First Trust

0.88

Correlation Coefficient

Invesco Optimum  First Trust

Very poor diversification

The 3 months correlation between Invesco and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Optimum Yield and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and Invesco Optimum 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 Optimum Yield 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 Global has no effect on the direction of Invesco Optimum i.e., Invesco Optimum and First Trust go up and down completely randomly.

Pair Corralation between Invesco Optimum and First Trust

Given the investment horizon of 90 days Invesco Optimum is expected to generate 1.55 times less return on investment than First Trust. In addition to that, Invesco Optimum is 1.15 times more volatile than First Trust Global. It trades about 0.1 of its total potential returns per unit of risk. First Trust Global is currently generating about 0.17 per unit of volatility. If you would invest  2,377  in First Trust Global on December 29, 2024 and sell it today you would earn a total of  156.00  from holding First Trust Global or generate 6.56% return on investment over 90 days.

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

Invesco Optimum Yield  vs.  First Trust Global

Invesco Optimum Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Optimum Yield are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco Optimum is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Invesco Optimum and First Trust

The main advantage of trading using opposite Invesco Optimum and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Optimum 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 Optimum Yield and First Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.