Correlation Between First Trust and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco FTSE 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 FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Nasdaq and Invesco FTSE RAFI, you can compare the effects of market volatilities on First Trust and Invesco FTSE 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 FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco FTSE.
Diversification Opportunities for First Trust and Invesco FTSE
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Invesco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Nasdaq are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of First Trust i.e., First Trust and Invesco FTSE go up and down completely randomly.
Pair Corralation between First Trust and Invesco FTSE
Assuming the 90 days trading horizon First Trust Nasdaq is expected to under-perform the Invesco FTSE. In addition to that, First Trust is 2.02 times more volatile than Invesco FTSE RAFI. It trades about -0.09 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about -0.08 per unit of volatility. If you would invest 3,677 in Invesco FTSE RAFI on December 1, 2024 and sell it today you would lose (57.00) from holding Invesco FTSE RAFI or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Nasdaq vs. Invesco FTSE RAFI
Performance |
| Timeline |
| First Trust Nasdaq |
| Invesco FTSE RAFI |
First Trust and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco FTSE
The main advantage of trading using opposite First Trust and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco FTSE 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 FTSE will offset losses from the drop in Invesco FTSE's long position.| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
| Invesco FTSE vs. Invesco FTSE RAFI | Invesco FTSE vs. Invesco 1 3 Year | Invesco FTSE vs. iShares SP Mid Cap |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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