Correlation Between Invesco Variable and First Trust
Can any of the company-specific risk be diversified away by investing in both Invesco Variable 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 Variable 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 Variable Rate and First Trust Senior, you can compare the effects of market volatilities on Invesco Variable 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 Variable with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Variable and First Trust.
Diversification Opportunities for Invesco Variable and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Invesco and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Variable Rate and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Invesco Variable 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 Variable Rate 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 Senior has no effect on the direction of Invesco Variable i.e., Invesco Variable and First Trust go up and down completely randomly.
Pair Corralation between Invesco Variable and First Trust
Considering the 90-day investment horizon Invesco Variable is expected to generate 1.58 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco Variable Rate is 1.11 times less risky than First Trust. It trades about 0.18 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,592 in First Trust Senior on September 1, 2024 and sell it today you would earn a total of 39.00 from holding First Trust Senior or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Variable Rate vs. First Trust Senior
Performance |
| Timeline |
| Invesco Variable Rate |
| First Trust Senior |
Invesco Variable and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Variable and First Trust
The main advantage of trading using opposite Invesco Variable and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Variable 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 Variable vs. VanEck Preferred Securities | Invesco Variable vs. First Trust Preferred | Invesco Variable vs. SPDR ICE Preferred | Invesco Variable vs. Global X SuperIncome |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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