Correlation Between Invesco New and First Trust

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

Diversification Opportunities for Invesco New and First Trust

0.91

Correlation Coefficient

Invesco New  First Trust

Almost no diversification

The 3 months correlation between Invesco and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Invesco New York and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Invesco New 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 New York 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 Exchange has no effect on the direction of Invesco New i.e., Invesco New and First Trust go up and down completely randomly.

Pair Corralation between Invesco New and First Trust

Considering the 90-day investment horizon Invesco New York is expected to generate 1.19 times more return on investment than First Trust. However, Invesco New is 1.19 times more volatile than First Trust Exchange Traded. It trades about 0.07 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.05 per unit of risk. If you would invest  2,288  in Invesco New York on August 30, 2024 and sell it today you would earn a total of  32.00  from holding Invesco New York or generate 1.4% return on investment over 90 days.

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

Invesco New York  vs.  First Trust Exchange Traded

Invesco New York

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco New York are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco New is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Exchange

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco New and First Trust

The main advantage of trading using opposite Invesco New and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco New 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 New York and First Trust Exchange Traded 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.