Correlation Between First Trust and Invesco NASDAQ
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco NASDAQ 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 NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Mid and Invesco NASDAQ Future, you can compare the effects of market volatilities on First Trust and Invesco NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco NASDAQ.
Diversification Opportunities for First Trust and Invesco NASDAQ
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Invesco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mid and Invesco NASDAQ Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ Future 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 Mid are associated (or correlated) with Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ Future has no effect on the direction of First Trust i.e., First Trust and Invesco NASDAQ go up and down completely randomly.
Pair Corralation between First Trust and Invesco NASDAQ
Considering the 90-day investment horizon First Trust Mid is expected to generate 0.77 times more return on investment than Invesco NASDAQ. However, First Trust Mid is 1.3 times less risky than Invesco NASDAQ. It trades about 0.29 of its potential returns per unit of risk. Invesco NASDAQ Future is currently generating about 0.16 per unit of risk. If you would invest 11,725 in First Trust Mid on August 27, 2024 and sell it today you would earn a total of 1,003 from holding First Trust Mid or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Mid vs. Invesco NASDAQ Future
Performance |
| Timeline |
| First Trust Mid |
| Invesco NASDAQ Future |
First Trust and Invesco NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco NASDAQ
The main advantage of trading using opposite First Trust and Invesco NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco NASDAQ 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 NASDAQ will offset losses from the drop in Invesco NASDAQ's long position.| First Trust vs. Vanguard Mid Cap Index | First Trust vs. iShares Core SP | First Trust vs. SPDR SP MIDCAP | First Trust vs. First Trust Dorsey |
| Invesco NASDAQ vs. Invesco PureBeta MSCI | Invesco NASDAQ vs. Aquagold International | Invesco NASDAQ vs. Morningstar Unconstrained Allocation | Invesco NASDAQ vs. High Yield Municipal Fund |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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