Correlation Between Invesco DWA and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco DWA 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 DWA 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 DWA Consumer and First Trust Indxx, you can compare the effects of market volatilities on Invesco DWA 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 DWA with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and First Trust.
Diversification Opportunities for Invesco DWA and First Trust
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Invesco and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and Invesco DWA 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 DWA Consumer 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 Indxx has no effect on the direction of Invesco DWA i.e., Invesco DWA and First Trust go up and down completely randomly.
Pair Corralation between Invesco DWA and First Trust
Considering the 90-day investment horizon Invesco DWA Consumer is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Consumer is 1.58 times less risky than First Trust. The etf trades about -0.35 of its potential returns per unit of risk. The First Trust Indxx is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 3,194 in First Trust Indxx on September 25, 2024 and sell it today you would lose (134.00) from holding First Trust Indxx or give up 4.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Invesco DWA Consumer vs. First Trust Indxx
Performance |
Timeline |
Invesco DWA Consumer |
First Trust Indxx |
Invesco DWA and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Invesco DWA and First Trust
The main advantage of trading using opposite Invesco DWA and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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.Invesco DWA vs. First Trust Consumer | Invesco DWA vs. First Trust Health | Invesco DWA vs. First Trust Utilities | Invesco DWA vs. First Trust IndustrialsProducer |
First Trust vs. Invesco DWA Consumer | First Trust vs. Invesco DWA Basic | First Trust vs. Invesco DWA Consumer | First Trust vs. Invesco DWA Financial |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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