Correlation Between First Trust and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Portfolio 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 Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and SPDR Portfolio SP, you can compare the effects of market volatilities on First Trust and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Portfolio.
Diversification Opportunities for First Trust and SPDR Portfolio
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 Value and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 Value are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of First Trust i.e., First Trust and SPDR Portfolio go up and down completely randomly.
Pair Corralation between First Trust and SPDR Portfolio
Considering the 90-day investment horizon First Trust is expected to generate 1.55 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, First Trust Value is 1.01 times less risky than SPDR Portfolio. It trades about 0.03 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,152 in SPDR Portfolio SP on November 2, 2024 and sell it today you would earn a total of 137.00 from holding SPDR Portfolio SP or generate 2.66% 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 Value vs. SPDR Portfolio SP
Performance |
| Timeline |
| First Trust Value |
| SPDR Portfolio SP |
First Trust and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Portfolio
The main advantage of trading using opposite First Trust and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.| First Trust vs. First Trust Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR SP 600 |
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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