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 MidCap and First Trust Multi, 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
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP MidCap and First Trust Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi 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 MidCap 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 Multi 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
Given the investment horizon of 90 days Invesco SP MidCap is expected to generate 0.77 times more return on investment than First Trust. However, Invesco SP MidCap is 1.3 times less risky than First Trust. It trades about -0.2 of its potential returns per unit of risk. First Trust Multi is currently generating about -0.18 per unit of risk. If you would invest 5,524 in Invesco SP MidCap on January 20, 2024 and sell it today you would lose (165.00) from holding Invesco SP MidCap or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP MidCap vs. First Trust Multi
Performance |
| Timeline |
| Invesco SP MidCap |
| First Trust Multi |
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. Vanguard Small Cap Index | Invesco SP vs. Vanguard Large Cap Index | Invesco SP vs. Vanguard Small Cap Growth | Invesco SP vs. Vanguard Small Cap Value |
| First Trust vs. WisdomTree SmallCap Earnings | First Trust vs. WisdomTree Earnings 500 | First Trust vs. NXG NextGen Infrastructure | First Trust vs. WisdomTree SmallCap Dividend |
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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