Correlation Between Invesco BuyBack and First Trust

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

Diversification Opportunities for Invesco BuyBack and First Trust

0.89

Correlation Coefficient

Invesco BuyBack  First Trust

Very poor diversification

The 3 months correlation between Invesco and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco BuyBack Achievers and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity and Invesco BuyBack 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 BuyBack 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 Equity has no effect on the direction of Invesco BuyBack i.e., Invesco BuyBack and First Trust go up and down completely randomly.

Pair Corralation between Invesco BuyBack and First Trust

Considering the 90-day investment horizon Invesco BuyBack Achievers is expected to generate 0.42 times more return on investment than First Trust. However, Invesco BuyBack Achievers is 2.39 times less risky than First Trust. It trades about 0.0 of its potential returns per unit of risk. First Trust Equity is currently generating about -0.03 per unit of risk. If you would invest  11,491  in Invesco BuyBack Achievers on December 28, 2024 and sell it today you would lose (64.00) from holding Invesco BuyBack Achievers or give up 0.56% of portfolio value over 90 days.

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

Invesco BuyBack Achievers  vs.  First Trust Equity

Invesco BuyBack Achievers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco BuyBack Achievers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking signals, Invesco BuyBack is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Trust Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco BuyBack and First Trust

The main advantage of trading using opposite Invesco BuyBack and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco BuyBack 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 BuyBack Achievers and First Trust Equity 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.