Correlation Between First Trust and Invesco Water

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco Water 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 First Trust and Invesco Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and Invesco Water Resources, you can compare the effects of market volatilities on First Trust and Invesco Water 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 First Trust with a short position of Invesco Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco Water.

Diversification Opportunities for First Trust and Invesco Water

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between First and Invesco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Invesco Water Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Water Resources and First Trust 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 First Trust NASDAQ are associated (or correlated) with Invesco Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Water Resources has no effect on the direction of First Trust i.e., First Trust and Invesco Water go up and down completely randomly.

Pair Corralation between First Trust and Invesco Water

Given the investment horizon of 90 days First Trust is expected to generate 5.38 times less return on investment than Invesco Water. In addition to that, First Trust is 2.63 times more volatile than Invesco Water Resources. It trades about 0.02 of its total potential returns per unit of risk. Invesco Water Resources is currently generating about 0.26 per unit of volatility. If you would invest  6,366  in Invesco Water Resources on December 29, 2023 and sell it today you would earn a total of  291.00  from holding Invesco Water Resources or generate 4.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

First Trust NASDAQ  vs.  Invesco Water Resources

 Performance 
       Timeline  
First Trust NASDAQ 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's essential indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.
Invesco Water Resources 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Water Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical indicators, Invesco Water may actually be approaching a critical reversion point that can send shares even higher in April 2024.

First Trust and Invesco Water Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Invesco Water

The main advantage of trading using opposite First Trust and Invesco Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco Water 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 Invesco Water will offset losses from the drop in Invesco Water's long position.
The idea behind First Trust NASDAQ and Invesco Water Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

Other Complementary Tools

Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Piotroski F Score
Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
FinTech Suite
Use AI to screen and filter profitable investment opportunities
Stocks Directory
Find actively traded stocks across global markets
Commodity Directory
Find actively traded commodities issued by global exchanges
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk