Correlation Between Invesco Dynamic and First Trust

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

Diversification Opportunities for Invesco Dynamic and First Trust

0.48

Correlation Coefficient

Invesco Dynamic  First Trust

Very weak diversification

The 3 months correlation between Invesco and First is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Large and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and Invesco Dynamic 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 Dynamic Large 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 NASDAQ has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and First Trust go up and down completely randomly.

Pair Corralation between Invesco Dynamic and First Trust

Considering the 90-day investment horizon Invesco Dynamic Large is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Dynamic Large is 1.45 times less risky than First Trust. The etf trades about -0.22 of its potential returns per unit of risk. The First Trust NASDAQ is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,883  in First Trust NASDAQ on September 17, 2024 and sell it today you would earn a total of  281.00  from holding First Trust NASDAQ or generate 3.56% return on investment over 90 days.

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

Invesco Dynamic Large  vs.  First Trust NASDAQ

Invesco Dynamic Large

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Large are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Invesco Dynamic is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First Trust NASDAQ

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 6 (%) 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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Invesco Dynamic and First Trust

The main advantage of trading using opposite Invesco Dynamic and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Dynamic 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 Dynamic Large and First Trust NASDAQ 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.