Correlation Between Invesco Solar and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco Solar 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 Solar 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 Solar ETF and First Trust NASDAQ, you can compare the effects of market volatilities on Invesco Solar 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 Solar with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Solar and First Trust.
Diversification Opportunities for Invesco Solar and First Trust
0.74 | Correlation Coefficient |
Poor diversification
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 Solar ETF 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 Solar 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 Solar ETF 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 Solar i.e., Invesco Solar and First Trust go up and down completely randomly.
Pair Corralation between Invesco Solar and First Trust
Considering the 90-day investment horizon Invesco Solar ETF is expected to under-perform the First Trust. In addition to that, Invesco Solar is 1.09 times more volatile than First Trust NASDAQ. It trades about -0.06 of its total potential returns per unit of risk. First Trust NASDAQ is currently generating about -0.04 per unit of volatility. If you would invest 5,787 in First Trust NASDAQ on August 23, 2024 and sell it today you would lose (2,423) from holding First Trust NASDAQ or give up 41.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Solar ETF vs. First Trust NASDAQ
Performance |
| Timeline |
| Invesco Solar ETF |
| First Trust NASDAQ |
Invesco Solar and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Solar and First Trust
The main advantage of trading using opposite Invesco Solar and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Solar 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 Solar vs. iShares Global Clean | Invesco Solar vs. Invesco WilderHill Clean | Invesco Solar vs. First Trust NASDAQ | Invesco Solar vs. Global X Lithium |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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