Correlation Between Invesco WilderHill and First Trust

Can any of the company-specific risk be diversified away by investing in both Invesco WilderHill 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 WilderHill 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 WilderHill Clean and First Trust NASDAQ, you can compare the effects of market volatilities on Invesco WilderHill 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 WilderHill with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco WilderHill and First Trust.

Diversification Opportunities for Invesco WilderHill and First Trust

0.98

Correlation Coefficient

Invesco WilderHill  First Trust

Almost no diversification

The 3 months correlation between Invesco and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco WilderHill Clean 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 WilderHill 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 WilderHill Clean 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 WilderHill i.e., Invesco WilderHill and First Trust go up and down completely randomly.

Pair Corralation between Invesco WilderHill and First Trust

Considering the 90-day investment horizon Invesco WilderHill Clean is expected to under-perform the First Trust. In addition to that, Invesco WilderHill is 1.09 times more volatile than First Trust NASDAQ. It trades about -0.3 of its total potential returns per unit of risk. First Trust NASDAQ is currently generating about -0.19 per unit of volatility. If you would invest  3,455  in First Trust NASDAQ on January 30, 2024 and sell it today you would lose (253.00) from holding First Trust NASDAQ or give up 7.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Invesco WilderHill Clean  vs.  First Trust NASDAQ

Invesco WilderHill Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco WilderHill Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's fundamental drivers remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

First Trust NASDAQ

Risk-Adjusted Performance

0 of 100

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 very healthy essential indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco WilderHill and First Trust

The main advantage of trading using opposite Invesco WilderHill and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco WilderHill 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.

The idea behind Invesco WilderHill Clean and First Trust NASDAQ 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.