Correlation Between Invesco Active and First Trust

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

Diversification Opportunities for Invesco Active and First Trust

0.95

Correlation Coefficient

Invesco Active  First Trust

Almost no diversification

The 3 months correlation between Invesco and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Active Real and First Trust SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SP and Invesco Active 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 Active Real 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 SP has no effect on the direction of Invesco Active i.e., Invesco Active and First Trust go up and down completely randomly.

Pair Corralation between Invesco Active and First Trust

Considering the 90-day investment horizon Invesco Active is expected to generate 1.08 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco Active Real is 1.13 times less risky than First Trust. It trades about 0.32 of its potential returns per unit of risk. First Trust SP is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,401  in First Trust SP on February 7, 2025 and sell it today you would earn a total of  294.00  from holding First Trust SP or generate 12.24% return on investment over 90 days.

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

Invesco Active Real  vs.  First Trust SP

Invesco Active Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Active Real has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco Active is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

First Trust SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Invesco Active and First Trust

The main advantage of trading using opposite Invesco Active and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Active 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 Active Real and First Trust SP 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.