Correlation Between First Trust and SPDR SP
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and SPDR SP MIDCAP, you can compare the effects of market volatilities on First Trust and SPDR SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR SP.
Diversification Opportunities for First Trust and SPDR SP
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and SPDR SP MIDCAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP MIDCAP 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 Dorsey are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP MIDCAP has no effect on the direction of First Trust i.e., First Trust and SPDR SP go up and down completely randomly.
Pair Corralation between First Trust and SPDR SP
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 0.99 times more return on investment than SPDR SP. However, First Trust Dorsey is 1.01 times less risky than SPDR SP. It trades about 0.27 of its potential returns per unit of risk. SPDR SP MIDCAP is currently generating about 0.19 per unit of risk. If you would invest 5,956 in First Trust Dorsey on November 9, 2024 and sell it today you would earn a total of 288.00 from holding First Trust Dorsey or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. SPDR SP MIDCAP
Performance |
| Timeline |
| First Trust Dorsey |
| SPDR SP MIDCAP |
First Trust and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR SP
The main advantage of trading using opposite First Trust and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| SPDR SP vs. iShares Core SP | SPDR SP vs. iShares Russell 2000 | SPDR SP vs. iShares MSCI EAFE | SPDR SP vs. iShares Russell 2000 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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