Correlation Between Invesco Dividend and First Trust

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

Diversification Opportunities for Invesco Dividend and First Trust

0.25

Correlation Coefficient

Invesco Dividend  First Trust

Modest diversification

The 3 months correlation between Invesco and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dividend Achievers and First Trust Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Morningstar and Invesco Dividend 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 Dividend Achievers 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 Morningstar has no effect on the direction of Invesco Dividend i.e., Invesco Dividend and First Trust go up and down completely randomly.

Pair Corralation between Invesco Dividend and First Trust

Considering the 90-day investment horizon Invesco Dividend is expected to generate 12.4 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco Dividend Achievers is 1.02 times less risky than First Trust. It trades about 0.02 of its potential returns per unit of risk. First Trust Morningstar is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,973  in First Trust Morningstar on December 28, 2024 and sell it today you would earn a total of  367.00  from holding First Trust Morningstar or generate 9.24% return on investment over 90 days.

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

Invesco Dividend Achievers  vs.  First Trust Morningstar

Invesco Dividend Ach

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dividend Achievers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Invesco Dividend is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Trust Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Morningstar are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady 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 Dividend and First Trust

The main advantage of trading using opposite Invesco Dividend and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dividend 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 Dividend Achievers and First Trust Morningstar 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.