Correlation Between Invesco Aerospace and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco Aerospace 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 Aerospace 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 Aerospace Defense and First Trust Nasdaq, you can compare the effects of market volatilities on Invesco Aerospace 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 Aerospace with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Aerospace and First Trust.
Diversification Opportunities for Invesco Aerospace and First Trust
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Invesco Aerospace 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 Aerospace Defense 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 Nasdaq has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and First Trust go up and down completely randomly.
Pair Corralation between Invesco Aerospace and First Trust
Considering the 90-day investment horizon Invesco Aerospace Defense is expected to generate 0.63 times more return on investment than First Trust. However, Invesco Aerospace Defense is 1.6 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.04 per unit of risk. If you would invest 7,725 in Invesco Aerospace Defense on August 27, 2024 and sell it today you would earn a total of 4,379 from holding Invesco Aerospace Defense or generate 56.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Aerospace Defense vs. First Trust Nasdaq
Performance |
| Timeline |
| Invesco Aerospace Defense |
| First Trust Nasdaq |
Invesco Aerospace and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Aerospace and First Trust
The main advantage of trading using opposite Invesco Aerospace and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Aerospace 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 Aerospace vs. SPDR SP Aerospace | Invesco Aerospace vs. iShares Aerospace Defense | Invesco Aerospace vs. Invesco Dynamic Building | Invesco Aerospace vs. Invesco Dynamic Semiconductors |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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