Correlation Between Invesco Aerospace and First Trust

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

Diversification Opportunities for Invesco Aerospace and First Trust

0.72

Correlation Coefficient

Invesco Aerospace  First Trust

Poor diversification

The 3 months correlation between Invesco and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri and Invesco Aerospace 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 Aerospace Defense 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 Industri has no effect on the direction of Invesco Aerospace i.e., Invesco Aerospace and First Trust go up and down completely randomly.

Pair Corralation between Invesco Aerospace and First Trust

Considering the 90-day investment horizon Invesco Aerospace Defense is expected to generate 0.82 times more return on investment than First Trust. However, Invesco Aerospace Defense is 1.22 times less risky than First Trust. It trades about 0.25 of its potential returns per unit of risk. First Trust IndustrialsProducer is currently generating about 0.14 per unit of risk. If you would invest  9,500  in Invesco Aerospace Defense on February 17, 2024 and sell it today you would earn a total of  999.00  from holding Invesco Aerospace Defense or generate 10.52% return on investment over 90 days.

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

Invesco Aerospace Defense  vs.  First Trust IndustrialsProduce

Invesco Aerospace Defense

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Aerospace Defense are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Invesco Aerospace may actually be approaching a critical reversion point that can send shares even higher in June 2024.

First Trust Industri

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust IndustrialsProducer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Invesco Aerospace and First Trust

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

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.