Correlation Between First Trust and SPDR Morgan
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Morgan 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 SPDR Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and SPDR Morgan Stanley, you can compare the effects of market volatilities on First Trust and SPDR Morgan 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 SPDR Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Morgan.
Diversification Opportunities for First Trust and SPDR Morgan
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 NASDAQ are associated (or correlated) with SPDR Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of First Trust i.e., First Trust and SPDR Morgan go up and down completely randomly.
Pair Corralation between First Trust and SPDR Morgan
Given the investment horizon of 90 days First Trust NASDAQ is expected to generate 1.16 times more return on investment than SPDR Morgan. However, First Trust is 1.16 times more volatile than SPDR Morgan Stanley. It trades about 0.06 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.03 per unit of risk. If you would invest 6,193 in First Trust NASDAQ on August 30, 2024 and sell it today you would earn a total of 107.00 from holding First Trust NASDAQ or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Trust NASDAQ vs. SPDR Morgan Stanley
Performance |
| Timeline |
| First Trust NASDAQ |
| SPDR Morgan Stanley |
First Trust and SPDR Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Morgan
The main advantage of trading using opposite First Trust and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Morgan 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 SPDR Morgan will offset losses from the drop in SPDR Morgan's long position.| First Trust vs. Amplify ETF Trust | First Trust vs. Global X Cybersecurity | First Trust vs. iShares Cybersecurity and | First Trust vs. First Trust Cloud |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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