Correlation Between First Trust and SPDR Bloomberg
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Bloomberg 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 Bloomberg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Enhanced and SPDR Bloomberg Investment, you can compare the effects of market volatilities on First Trust and SPDR Bloomberg 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 Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Bloomberg.
Diversification Opportunities for First Trust and SPDR Bloomberg
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Enhanced and SPDR Bloomberg Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Investment 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 Enhanced are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Investment has no effect on the direction of First Trust i.e., First Trust and SPDR Bloomberg go up and down completely randomly.
Pair Corralation between First Trust and SPDR Bloomberg
Given the investment horizon of 90 days First Trust is expected to generate 1.21 times less return on investment than SPDR Bloomberg. But when comparing it to its historical volatility, First Trust Enhanced is 1.36 times less risky than SPDR Bloomberg. It trades about 0.42 of its potential returns per unit of risk. SPDR Bloomberg Investment is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,070 in SPDR Bloomberg Investment on August 26, 2024 and sell it today you would earn a total of 10.00 from holding SPDR Bloomberg Investment or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Enhanced vs. SPDR Bloomberg Investment
Performance |
| Timeline |
| First Trust Enhanced |
| SPDR Bloomberg Investment |
First Trust and SPDR Bloomberg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Bloomberg
The main advantage of trading using opposite First Trust and SPDR Bloomberg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Bloomberg 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 Bloomberg will offset losses from the drop in SPDR Bloomberg's long position.| First Trust vs. First Trust Low | First Trust vs. First Trust Senior | First Trust vs. First Trust TCW | First Trust vs. First Trust Tactical |
| SPDR Bloomberg vs. iShares Floating Rate | SPDR Bloomberg vs. VanEck Investment Grade | SPDR Bloomberg vs. SPDR Blackstone Senior | SPDR Bloomberg vs. Invesco Ultra Short |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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