Correlation Between Invesco VRDO and First Trust

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

Diversification Opportunities for Invesco VRDO and First Trust

0.78

Correlation Coefficient

Invesco VRDO  First Trust

Poor diversification

The 3 months correlation between Invesco and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Invesco VRDO Tax Free and First Trust Structured in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Structured and Invesco VRDO 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 VRDO Tax Free 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 Structured has no effect on the direction of Invesco VRDO i.e., Invesco VRDO and First Trust go up and down completely randomly.

Pair Corralation between Invesco VRDO and First Trust

Considering the 90-day investment horizon Invesco VRDO is expected to generate 11.6 times less return on investment than First Trust. But when comparing it to its historical volatility, Invesco VRDO Tax Free is 2.25 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust Structured is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,005  in First Trust Structured on May 2, 2025 and sell it today you would earn a total of  57.00  from holding First Trust Structured or generate 2.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Invesco VRDO Tax Free  vs.  First Trust Structured

Invesco VRDO Tax

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco VRDO Tax Free are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco VRDO is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Structured

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Structured are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Invesco VRDO and First Trust

The main advantage of trading using opposite Invesco VRDO and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco VRDO 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 VRDO Tax Free and First Trust Structured 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 Stocks Directory module to find actively traded stocks across global markets.