Correlation Between Invesco Active and First Trust

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

Diversification Opportunities for Invesco Active and First Trust

0.0

Correlation Coefficient

Invesco Active  First Trust

Pay attention - limited upside

The 3 months correlation between Invesco and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Active Real and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and Invesco Active 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 Active Real 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 Consumer has no effect on the direction of Invesco Active i.e., Invesco Active and First Trust go up and down completely randomly.

Pair Corralation between Invesco Active and First Trust

Considering the 90-day investment horizon Invesco Active Real is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Active Real is 1.02 times less risky than First Trust. The etf trades about -0.04 of its potential returns per unit of risk. The First Trust Consumer is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,032  in First Trust Consumer on September 12, 2024 and sell it today you would earn a total of  748.00  from holding First Trust Consumer or generate 12.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Invesco Active Real  vs.  First Trust Consumer

Invesco Active Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Active Real has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco Active is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Consumer

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Consumer are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Invesco Active and First Trust

The main advantage of trading using opposite Invesco Active and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Active 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 Active Real and First Trust Consumer 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.