Correlation Between First Trust and Invesco BulletShares
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco BulletShares 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 BulletShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and Invesco BulletShares 2027, you can compare the effects of market volatilities on First Trust and Invesco BulletShares 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 BulletShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco BulletShares.
Diversification Opportunities for First Trust and Invesco BulletShares
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Invesco BulletShares 2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco BulletShares 2027 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 Enhanced are associated (or correlated) with Invesco BulletShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco BulletShares 2027 has no effect on the direction of First Trust i.e., First Trust and Invesco BulletShares go up and down completely randomly.
Pair Corralation between First Trust and Invesco BulletShares
Given the investment horizon of 90 days First Trust is expected to generate 1.77 times less return on investment than Invesco BulletShares. But when comparing it to its historical volatility, First Trust Enhanced is 11.12 times less risky than Invesco BulletShares. It trades about 0.61 of its potential returns per unit of risk. Invesco BulletShares 2027 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,896 in Invesco BulletShares 2027 on August 30, 2024 and sell it today you would earn a total of 362.00 from holding Invesco BulletShares 2027 or generate 19.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. Invesco BulletShares 2027
Performance |
| Timeline |
| First Trust Enhanced |
| Invesco BulletShares 2027 |
First Trust and Invesco BulletShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco BulletShares
The main advantage of trading using opposite First Trust and Invesco BulletShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco BulletShares 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 BulletShares will offset losses from the drop in Invesco BulletShares' long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| Invesco BulletShares vs. iShares Edge Investment | Invesco BulletShares vs. iShares Intl High | Invesco BulletShares vs. iShares JP Morgan |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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