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

0.98

Correlation Coefficient

Invesco BuyBack  First Trust

Almost no diversification

The 3 months correlation between Invesco and First is 0.98. 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 is expected to generate 2.23 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco BuyBack Achievers is 1.66 times less risky than First Trust. It trades about 0.16 of its potential returns per unit of risk. First Trust Equity is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  10,606  in First Trust Equity on September 14, 2024 and sell it today you would earn a total of  1,925  from holding First Trust Equity or generate 18.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Invesco BuyBack Achievers  vs.  First Trust Equity

Invesco BuyBack Achievers

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco BuyBack Achievers are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Invesco BuyBack may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust Equity

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Equity are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, First Trust showed solid returns over the last few months and may actually be approaching a breakup point.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.