Correlation Between First Trust and Invesco Aaa
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Aaa 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 Aaa 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 Aaa Clo, you can compare the effects of market volatilities on First Trust and Invesco Aaa 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 Aaa. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Aaa.
Diversification Opportunities for First Trust and Invesco Aaa
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and Invesco Aaa Clo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Aaa Clo 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 Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Aaa Clo has no effect on the direction of First Trust i.e., First Trust and Invesco Aaa go up and down completely randomly.
Pair Corralation between First Trust and Invesco Aaa
Given the investment horizon of 90 days First Trust is expected to generate 1.64 times less return on investment than Invesco Aaa. But when comparing it to its historical volatility, First Trust Enhanced is 1.55 times less risky than Invesco Aaa. It trades about 0.53 of its potential returns per unit of risk. Invesco Aaa Clo is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 2,550 in Invesco Aaa Clo on August 30, 2024 and sell it today you would earn a total of 14.00 from holding Invesco Aaa Clo or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. Invesco Aaa Clo
Performance |
| Timeline |
| First Trust Enhanced |
| Invesco Aaa Clo |
First Trust and Invesco Aaa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco Aaa
The main advantage of trading using opposite First Trust and Invesco Aaa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Aaa 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 Aaa will offset losses from the drop in Invesco Aaa's 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 Aaa vs. VanEck Vectors Moodys | Invesco Aaa vs. BondBloxx ETF Trust | Invesco Aaa vs. Vanguard ESG Corporate | Invesco Aaa vs. Vanguard Intermediate Term Corporate |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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