Correlation Between Invesco Optimum and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco Optimum 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 Optimum 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 Optimum Yield and First Trust Alternative, you can compare the effects of market volatilities on Invesco Optimum 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 Optimum with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Optimum and First Trust.
Diversification Opportunities for Invesco Optimum and First Trust
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Optimum Yield and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and Invesco Optimum 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 Optimum Yield 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 Alternative has no effect on the direction of Invesco Optimum i.e., Invesco Optimum and First Trust go up and down completely randomly.
Pair Corralation between Invesco Optimum and First Trust
Given the investment horizon of 90 days Invesco Optimum Yield is expected to generate 1.36 times more return on investment than First Trust. However, Invesco Optimum is 1.36 times more volatile than First Trust Alternative. It trades about 0.14 of its potential returns per unit of risk. First Trust Alternative is currently generating about -0.01 per unit of risk. If you would invest 1,305 in Invesco Optimum Yield on November 4, 2024 and sell it today you would earn a total of 28.00 from holding Invesco Optimum Yield or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Optimum Yield vs. First Trust Alternative
Performance |
| Timeline |
| Invesco Optimum Yield |
| First Trust Alternative |
Invesco Optimum and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Optimum and First Trust
The main advantage of trading using opposite Invesco Optimum and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Optimum 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 Optimum vs. iShares GSCI Commodity | Invesco Optimum vs. First Trust Global | Invesco Optimum vs. iShares SP GSCI | Invesco Optimum vs. Invesco DB Commodity |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust SSI | First Trust vs. First Trust Indxx |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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