Correlation Between First Trust and SPDR Barclays
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Barclays 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 Barclays into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust LongShort and SPDR Barclays Short, you can compare the effects of market volatilities on First Trust and SPDR Barclays 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 Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Barclays.
Diversification Opportunities for First Trust and SPDR Barclays
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and SPDR is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Trust LongShort and SPDR Barclays Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Short 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 LongShort are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Short has no effect on the direction of First Trust i.e., First Trust and SPDR Barclays go up and down completely randomly.
Pair Corralation between First Trust and SPDR Barclays
Given the investment horizon of 90 days First Trust LongShort is expected to generate 4.11 times more return on investment than SPDR Barclays. However, First Trust is 4.11 times more volatile than SPDR Barclays Short. It trades about 0.11 of its potential returns per unit of risk. SPDR Barclays Short is currently generating about 0.11 per unit of risk. If you would invest 4,834 in First Trust LongShort on October 20, 2024 and sell it today you would earn a total of 1,886 from holding First Trust LongShort or generate 39.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust LongShort vs. SPDR Barclays Short
Performance |
| Timeline |
| First Trust LongShort |
| SPDR Barclays Short |
First Trust and SPDR Barclays Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Barclays
The main advantage of trading using opposite First Trust and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Barclays 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 Barclays will offset losses from the drop in SPDR Barclays' long position.| First Trust vs. First Trust Managed | First Trust vs. IQ Hedge Multi Strategy | First Trust vs. First Trust BuyWrite | First Trust vs. SPDR SSgA Global |
| SPDR Barclays vs. SPDR Barclays Long | SPDR Barclays vs. SPDR Portfolio Intermediate | SPDR Barclays vs. SPDR Barclays Short | SPDR Barclays vs. SPDR Barclays Intermediate |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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