Correlation Between First Trust and Invesco Variable
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Variable 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 Variable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Preferred and Invesco Variable Rate, you can compare the effects of market volatilities on First Trust and Invesco Variable 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 Variable. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Variable.
Diversification Opportunities for First Trust and Invesco Variable
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred and Invesco Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Variable Rate 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 Preferred are associated (or correlated) with Invesco Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Variable Rate has no effect on the direction of First Trust i.e., First Trust and Invesco Variable go up and down completely randomly.
Pair Corralation between First Trust and Invesco Variable
Considering the 90-day investment horizon First Trust is expected to generate 1.29 times less return on investment than Invesco Variable. But when comparing it to its historical volatility, First Trust Preferred is 1.0 times less risky than Invesco Variable. It trades about 0.07 of its potential returns per unit of risk. Invesco Variable Rate is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,980 in Invesco Variable Rate on August 25, 2024 and sell it today you would earn a total of 460.00 from holding Invesco Variable Rate or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Preferred vs. Invesco Variable Rate
Performance |
| Timeline |
| First Trust Preferred |
| Invesco Variable Rate |
First Trust and Invesco Variable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco Variable
The main advantage of trading using opposite First Trust and Invesco Variable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Variable 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 Variable will offset losses from the drop in Invesco Variable's long position.| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
| Invesco Variable vs. VanEck Preferred Securities | Invesco Variable vs. First Trust Preferred | Invesco Variable vs. SPDR ICE Preferred | Invesco Variable vs. Global X SuperIncome |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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