Correlation Between SPDR Bloomberg and First Trust
Can any of the company-specific risk be diversified away by investing in both SPDR Bloomberg 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 SPDR Bloomberg and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Bloomberg Barclays and First Trust TCW, you can compare the effects of market volatilities on SPDR Bloomberg 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 SPDR Bloomberg with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and First Trust.
Diversification Opportunities for SPDR Bloomberg and First Trust
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Barclays and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and SPDR Bloomberg 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 SPDR Bloomberg Barclays 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 TCW has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and First Trust go up and down completely randomly.
Pair Corralation between SPDR Bloomberg and First Trust
Given the investment horizon of 90 days SPDR Bloomberg Barclays is expected to generate 1.93 times more return on investment than First Trust. However, SPDR Bloomberg is 1.93 times more volatile than First Trust TCW. It trades about 0.22 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.07 per unit of risk. If you would invest 2,412 in SPDR Bloomberg Barclays on September 1, 2024 and sell it today you would earn a total of 46.00 from holding SPDR Bloomberg Barclays or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Bloomberg Barclays vs. First Trust TCW
Performance |
| Timeline |
| SPDR Bloomberg Barclays |
| First Trust TCW |
SPDR Bloomberg and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Bloomberg and First Trust
The main advantage of trading using opposite SPDR Bloomberg and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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.| SPDR Bloomberg vs. SPDR DoubleLine Emerging | SPDR Bloomberg vs. SPDR SSGA Fixed | SPDR Bloomberg vs. SPDR Series Trust | SPDR Bloomberg vs. SSGA Active Trust |
| First Trust vs. First Trust TCW | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Senior |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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