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 Multi Manager 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
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Invesco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Manager 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 Multi Manager 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
Given the investment horizon of 90 days First Trust is expected to generate 2.95 times less return on investment than Invesco SP. But when comparing it to its historical volatility, First Trust Multi Manager is 1.23 times less risky than Invesco SP. It trades about 0.08 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5,041 in Invesco SP SmallCap on November 4, 2024 and sell it today you would earn a total of 319.00 from holding Invesco SP SmallCap or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Multi Manager vs. Invesco SP SmallCap
Performance |
| Timeline |
| First Trust Multi |
| 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 Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Active | First Trust vs. First Trust Expanded |
| Invesco SP vs. JPMorgan Fundamental Data | Invesco SP vs. Davis Select International | Invesco SP vs. Dimensional ETF Trust | Invesco SP vs. Principal Value ETF |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |