Correlation Between First Trust and Invesco WilderHill
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco WilderHill 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 WilderHill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Small and Invesco WilderHill Clean, you can compare the effects of market volatilities on First Trust and Invesco WilderHill 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 WilderHill. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco WilderHill.
Diversification Opportunities for First Trust and Invesco WilderHill
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Invesco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Small and Invesco WilderHill Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco WilderHill Clean 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 Small are associated (or correlated) with Invesco WilderHill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco WilderHill Clean has no effect on the direction of First Trust i.e., First Trust and Invesco WilderHill go up and down completely randomly.
Pair Corralation between First Trust and Invesco WilderHill
Considering the 90-day investment horizon First Trust Small is expected to generate 0.53 times more return on investment than Invesco WilderHill. However, First Trust Small is 1.88 times less risky than Invesco WilderHill. It trades about 0.06 of its potential returns per unit of risk. Invesco WilderHill Clean is currently generating about -0.04 per unit of risk. If you would invest 7,825 in First Trust Small on August 30, 2024 and sell it today you would earn a total of 3,130 from holding First Trust Small or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Small vs. Invesco WilderHill Clean
Performance |
| Timeline |
| First Trust Small |
| Invesco WilderHill Clean |
First Trust and Invesco WilderHill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco WilderHill
The main advantage of trading using opposite First Trust and Invesco WilderHill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco WilderHill 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 WilderHill will offset losses from the drop in Invesco WilderHill's long position.| First Trust vs. First Trust Mid | First Trust vs. First Trust Large | First Trust vs. First Trust Large | First Trust vs. First Trust Large |
| Invesco WilderHill vs. First Trust NASDAQ | Invesco WilderHill vs. Invesco Solar ETF | Invesco WilderHill vs. iShares Global Clean | Invesco WilderHill vs. Invesco Global Clean |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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