Correlation Between First Trust and Invesco Solar
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Solar 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 Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and Invesco Solar ETF, you can compare the effects of market volatilities on First Trust and Invesco Solar 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 Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Solar.
Diversification Opportunities for First Trust and Invesco Solar
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Invesco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Invesco Solar ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar ETF 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 NASDAQ are associated (or correlated) with Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar ETF has no effect on the direction of First Trust i.e., First Trust and Invesco Solar go up and down completely randomly.
Pair Corralation between First Trust and Invesco Solar
Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 0.98 times more return on investment than Invesco Solar. However, First Trust NASDAQ is 1.02 times less risky than Invesco Solar. It trades about -0.06 of its potential returns per unit of risk. Invesco Solar ETF is currently generating about -0.06 per unit of risk. If you would invest 3,442 in First Trust NASDAQ on November 3, 2024 and sell it today you would lose (89.00) from holding First Trust NASDAQ or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. Invesco Solar ETF
Performance |
| Timeline |
| First Trust NASDAQ |
| Invesco Solar ETF |
First Trust and Invesco Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Invesco Solar
The main advantage of trading using opposite First Trust and Invesco Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Solar 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 Solar will offset losses from the drop in Invesco Solar's long position.| First Trust vs. First Trust S Network | First Trust vs. FT Vest Equity | First Trust vs. Zillow Group Class | First Trust vs. Northern Lights |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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