Correlation Between Invesco Golden and First Trust

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

Diversification Opportunities for Invesco Golden and First Trust

0.95

Correlation Coefficient

Invesco Golden  First Trust

Almost no diversification

The 3 months correlation between Invesco and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Golden Dragon and First Trust China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust China and Invesco Golden 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 Golden Dragon 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 China has no effect on the direction of Invesco Golden i.e., Invesco Golden and First Trust go up and down completely randomly.

Pair Corralation between Invesco Golden and First Trust

Considering the 90-day investment horizon Invesco Golden Dragon is expected to generate 1.26 times more return on investment than First Trust. However, Invesco Golden is 1.26 times more volatile than First Trust China. It trades about 0.0 of its potential returns per unit of risk. First Trust China is currently generating about -0.04 per unit of risk. If you would invest  2,670  in Invesco Golden Dragon on September 23, 2024 and sell it today you would lose (26.00) from holding Invesco Golden Dragon or give up 0.97% of portfolio value over 90 days.

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

Invesco Golden Dragon  vs.  First Trust China

Invesco Golden Dragon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Golden Dragon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Invesco Golden revealed solid returns over the last few months and may actually be approaching a breakup point.

First Trust China

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust China are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Golden and First Trust

The main advantage of trading using opposite Invesco Golden and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Golden 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 Golden Dragon and First Trust China 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.