Correlation Between First Trust and Invesco International

Can any of the company-specific risk be diversified away by investing in both First Trust and Invesco International 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 International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Multi and Invesco International BuyBack, you can compare the effects of market volatilities on First Trust and Invesco International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Invesco International.

Diversification Opportunities for First Trust and Invesco International

-0.2

Correlation Coefficient

First Trust  Invesco International

Good diversification

The 3 months correlation between First and Invesco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi and Invesco International BuyBack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco International 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 Multi are associated (or correlated) with Invesco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco International has no effect on the direction of First Trust i.e., First Trust and Invesco International go up and down completely randomly.

Pair Corralation between First Trust and Invesco International

Considering the 90-day investment horizon First Trust Multi is expected to generate 1.15 times more return on investment than Invesco International. However, First Trust is 1.15 times more volatile than Invesco International BuyBack. It trades about 0.47 of its potential returns per unit of risk. Invesco International BuyBack is currently generating about -0.04 per unit of risk. If you would invest  13,441  in First Trust Multi on September 2, 2024 and sell it today you would earn a total of  1,537  from holding First Trust Multi or generate 11.44% return on investment over 90 days.

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

First Trust Multi  vs.  Invesco International BuyBack

First Trust Multi

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, First Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco International BuyBack are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward-looking signals, Invesco International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and Invesco International

The main advantage of trading using opposite First Trust and Invesco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Invesco International 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 International will offset losses from the drop in Invesco International's long position.

The idea behind First Trust Multi and Invesco International BuyBack 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..