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 Basic and First Trust IndustrialsProducer, 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
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Basic and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri 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 Basic 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 Industri 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 Basic is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Invesco DWA Basic is 1.01 times less risky than First Trust. The etf trades about -0.09 of its potential returns per unit of risk. The First Trust IndustrialsProducer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,453 in First Trust IndustrialsProducer on September 25, 2024 and sell it today you would earn a total of 159.50 from holding First Trust IndustrialsProducer or generate 2.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Invesco DWA Basic vs. First Trust IndustrialsProduce
Performance |
Timeline |
Invesco DWA Basic |
First Trust Industri |
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. Materials Select Sector | Invesco DWA vs. SPDR SP Metals | Invesco DWA vs. First Trust Materials | Invesco DWA vs. First Trust Water |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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