Correlation Between First Trust and Invesco Dynamic
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Dynamic 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 First Trust and Invesco Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Invesco Dynamic Oil, you can compare the effects of market volatilities on First Trust and Invesco Dynamic 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 First Trust with a short position of Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Dynamic.
Diversification Opportunities for First Trust and Invesco Dynamic
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Invesco Dynamic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Oil and First Trust 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 First Trust Exchange Traded are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Oil has no effect on the direction of First Trust i.e., First Trust and Invesco Dynamic go up and down completely randomly.
Pair Corralation between First Trust and Invesco Dynamic
Given the investment horizon of 90 days First Trust is expected to generate 1.18 times less return on investment than Invesco Dynamic. But when comparing it to its historical volatility, First Trust Exchange Traded is 2.56 times less risky than Invesco Dynamic. It trades about 0.46 of its potential returns per unit of risk. Invesco Dynamic Oil is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,738 in Invesco Dynamic Oil on September 1, 2024 and sell it today you would earn a total of 270.00 from holding Invesco Dynamic Oil or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Invesco Dynamic Oil
Performance |
| Timeline |
| First Trust Exchange |
| Invesco Dynamic Oil |
First Trust and Invesco Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco Dynamic
The main advantage of trading using opposite First Trust and Invesco Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Dynamic 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 Invesco Dynamic will offset losses from the drop in Invesco Dynamic's long position.The idea behind First Trust Exchange Traded and Invesco Dynamic Oil 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.| Invesco Dynamic vs. Invesco Dynamic Energy | Invesco Dynamic vs. iShares Oil Equipment | Invesco Dynamic vs. SPDR SP Oil | Invesco Dynamic vs. Invesco DWA Energy |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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