Correlation Between First Trust and Invesco SP
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and Invesco SP Emerging, you can compare the effects of market volatilities on First Trust and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco SP.
Diversification Opportunities for First Trust and Invesco SP
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Invesco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Invesco SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Emerging 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 Emerging are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP Emerging has no effect on the direction of First Trust i.e., First Trust and Invesco SP go up and down completely randomly.
Pair Corralation between First Trust and Invesco SP
Considering the 90-day investment horizon First Trust Emerging is expected to under-perform the Invesco SP. In addition to that, First Trust is 1.61 times more volatile than Invesco SP Emerging. It trades about -0.05 of its total potential returns per unit of risk. Invesco SP Emerging is currently generating about 0.06 per unit of volatility. If you would invest 2,330 in Invesco SP Emerging on September 1, 2024 and sell it today you would earn a total of 116.00 from holding Invesco SP Emerging or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. Invesco SP Emerging
Performance |
| Timeline |
| First Trust Emerging |
| Invesco SP Emerging |
First Trust and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco SP
The main advantage of trading using opposite First Trust and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| First Trust vs. First Trust Developed | First Trust vs. First Trust Emerging | First Trust vs. First Trust Europe | First Trust vs. First Trust Large |
| Invesco SP vs. Invesco SP International | Invesco SP vs. SPDR SP Emerging | Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco DWA Emerging |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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