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 Investment and First Trust Senior, 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
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Investment and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 Investment 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 Senior 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 is expected to generate 1.33 times less return on investment than First Trust. But when comparing it to its historical volatility, SPDR Bloomberg Investment is 2.3 times less risky than First Trust. It trades about 0.45 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 4,269 in First Trust Senior on August 27, 2024 and sell it today you would earn a total of 356.00 from holding First Trust Senior or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Bloomberg Investment vs. First Trust Senior
Performance |
| Timeline |
| SPDR Bloomberg Investment |
| First Trust Senior |
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. iShares Floating Rate | SPDR Bloomberg vs. VanEck Investment Grade | SPDR Bloomberg vs. SPDR Blackstone Senior | SPDR Bloomberg vs. Invesco Ultra Short |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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