Correlation Between Invesco DWA and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco DWA 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 DWA 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 DWA Consumer and First Trust Nasdaq, you can compare the effects of market volatilities on Invesco DWA 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 DWA with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DWA and First Trust.
Diversification Opportunities for Invesco DWA and First Trust
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Invesco and First is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DWA Consumer 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 DWA 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 DWA Consumer 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 DWA i.e., Invesco DWA and First Trust go up and down completely randomly.
Pair Corralation between Invesco DWA and First Trust
Considering the 90-day investment horizon Invesco DWA Consumer is expected to generate 1.09 times more return on investment than First Trust. However, Invesco DWA is 1.09 times more volatile than First Trust Nasdaq. It trades about 0.09 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.03 per unit of risk. If you would invest 9,634 in Invesco DWA Consumer on August 27, 2024 and sell it today you would earn a total of 1,262 from holding Invesco DWA Consumer or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco DWA Consumer vs. First Trust Nasdaq
Performance |
| Timeline |
| Invesco DWA Consumer |
| First Trust Nasdaq |
Invesco DWA and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco DWA and First Trust
The main advantage of trading using opposite Invesco DWA and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DWA 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 DWA vs. Invesco DWA Consumer | Invesco DWA vs. Invesco DWA Basic | Invesco DWA vs. Invesco DWA Industrials | Invesco DWA vs. Invesco DWA Utilities |
| First Trust vs. Vanguard Consumer Discretionary | First Trust vs. Vanguard Utilities Index | First Trust vs. Vanguard Industrials Index | First Trust vs. Vanguard Materials Index |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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