Correlation Between First Trust and Invesco SP
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Consumer and Invesco SP SmallCap, you can compare the effects of market volatilities on First Trust and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco SP.
Diversification Opportunities for First Trust and Invesco SP
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Invesco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 Consumer are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of First Trust i.e., First Trust and Invesco SP go up and down completely randomly.
Pair Corralation between First Trust and Invesco SP
Considering the 90-day investment horizon First Trust is expected to generate 1.0 times less return on investment than Invesco SP. But when comparing it to its historical volatility, First Trust Consumer is 1.54 times less risky than Invesco SP. It trades about 0.05 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,602 in Invesco SP SmallCap on August 29, 2024 and sell it today you would earn a total of 417.00 from holding Invesco SP SmallCap or generate 11.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Consumer vs. Invesco SP SmallCap
Performance |
| Timeline |
| First Trust Consumer |
| Invesco SP SmallCap |
First Trust and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco SP
The main advantage of trading using opposite First Trust and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| First Trust vs. First Trust Consumer | First Trust vs. First Trust Health | First Trust vs. First Trust Utilities | First Trust vs. First Trust IndustrialsProducer |
| Invesco SP vs. Vanguard Consumer Discretionary | Invesco SP vs. Vanguard Utilities Index | Invesco SP vs. Vanguard Industrials Index | Invesco SP vs. Vanguard Materials Index |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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