Correlation Between Invesco NASDAQ and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco NASDAQ 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 NASDAQ 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 NASDAQ 100 and First Trust Exchange Traded, you can compare the effects of market volatilities on Invesco NASDAQ 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 NASDAQ with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and First Trust.
Diversification Opportunities for Invesco NASDAQ and First Trust
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Invesco and First is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Invesco NASDAQ 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 NASDAQ 100 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 Exchange has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and First Trust go up and down completely randomly.
Pair Corralation between Invesco NASDAQ and First Trust
Given the investment horizon of 90 days Invesco NASDAQ is expected to generate 1.76 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco NASDAQ 100 is 1.16 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,514 in First Trust Exchange Traded on August 28, 2024 and sell it today you would earn a total of 102.00 from holding First Trust Exchange Traded or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco NASDAQ 100 vs. First Trust Exchange Traded
Performance |
| Timeline |
| Invesco NASDAQ 100 |
| First Trust Exchange |
Invesco NASDAQ and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco NASDAQ and First Trust
The main advantage of trading using opposite Invesco NASDAQ and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ 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 NASDAQ vs. Invesco Dynamic Large | Invesco NASDAQ vs. Perella Weinberg Partners | Invesco NASDAQ vs. HUMANA INC | Invesco NASDAQ vs. Aquagold International |
| First Trust vs. Invesco Dynamic Large | First Trust vs. Perella Weinberg Partners | First Trust vs. HUMANA INC | First Trust vs. Aquagold International |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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