Correlation Between Invesco SP and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco SP 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 SP 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 SP SmallCap and First Trust Mid, you can compare the effects of market volatilities on Invesco SP 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 SP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and First Trust.
Diversification Opportunities for Invesco SP and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap and First Trust Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Mid and Invesco SP 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 SP SmallCap 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 Mid has no effect on the direction of Invesco SP i.e., Invesco SP and First Trust go up and down completely randomly.
Pair Corralation between Invesco SP and First Trust
Considering the 90-day investment horizon Invesco SP is expected to generate 1.14 times less return on investment than First Trust. In addition to that, Invesco SP is 1.07 times more volatile than First Trust Mid. It trades about 0.07 of its total potential returns per unit of risk. First Trust Mid is currently generating about 0.08 per unit of volatility. If you would invest 6,232 in First Trust Mid on September 12, 2024 and sell it today you would earn a total of 2,279 from holding First Trust Mid or generate 36.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP SmallCap vs. First Trust Mid
Performance |
| Timeline |
| Invesco SP SmallCap |
| First Trust Mid |
Invesco SP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and First Trust
The main advantage of trading using opposite Invesco SP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 SP vs. FT Vest Equity | Invesco SP vs. Northern Lights | Invesco SP vs. Dimensional International High | Invesco SP vs. JPMorgan Fundamental Data |
| First Trust vs. Vanguard Mid Cap Growth | First Trust vs. iShares Russell Mid Cap | First Trust vs. ARK Innovation ETF | First Trust vs. iShares SP Mid Cap |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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