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 Dow 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
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and SPDR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dow 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 Dow 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
Considering the 90-day investment horizon First Trust Dow is expected to generate 1.01 times more return on investment than SPDR Morgan. However, First Trust is 1.01 times more volatile than SPDR Morgan Stanley. It trades about 0.33 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 22,153 in First Trust Dow on August 30, 2024 and sell it today you would earn a total of 2,004 from holding First Trust Dow or generate 9.05% 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 Dow vs. SPDR Morgan Stanley
Performance |
| Timeline |
| First Trust Dow |
| 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. First Trust Cloud | First Trust vs. iShares Expanded Tech Software | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust NASDAQ 100 Technology |
| SPDR Morgan vs. SPDR FactSet Innovative | SPDR Morgan vs. SPDR SP Software | SPDR Morgan vs. SPDR SP Health | SPDR Morgan vs. iShares Expanded Tech |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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