Correlation Between Invesco International and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco International and First Trust 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 Invesco International and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco International BuyBack and First Trust Small, you can compare the effects of market volatilities on Invesco International and First Trust 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 Invesco International with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco International and First Trust.
Diversification Opportunities for Invesco International and First Trust
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Invesco and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Invesco International BuyBack and First Trust Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Small and Invesco International 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 Invesco International BuyBack are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Small has no effect on the direction of Invesco International i.e., Invesco International and First Trust go up and down completely randomly.
Pair Corralation between Invesco International and First Trust
Given the investment horizon of 90 days Invesco International is expected to generate 1.26 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco International BuyBack is 1.5 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,541 in First Trust Small on August 31, 2024 and sell it today you would earn a total of 1,459 from holding First Trust Small or generate 32.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Invesco International BuyBack vs. First Trust Small
Performance |
| Timeline |
| Invesco International |
| First Trust Small |
Invesco International and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco International and First Trust
The main advantage of trading using opposite Invesco International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco International position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Invesco International vs. First Trust Dorsey | Invesco International vs. First Trust Emerging | Invesco International vs. First Trust Eurozone | Invesco International vs. Invesco SP SmallCap |
| First Trust vs. First Trust Mid | First Trust vs. First Trust Small | First Trust vs. First Trust Mid | First Trust vs. First Trust Small |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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