Correlation Between First Trust and SPDR Kensho
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Kensho 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 Kensho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ and SPDR Kensho Clean, you can compare the effects of market volatilities on First Trust and SPDR Kensho 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 Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Kensho.
Diversification Opportunities for First Trust and SPDR Kensho
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and SPDR Kensho Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Clean 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 NASDAQ are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Clean has no effect on the direction of First Trust i.e., First Trust and SPDR Kensho go up and down completely randomly.
Pair Corralation between First Trust and SPDR Kensho
Given the investment horizon of 90 days First Trust is expected to generate 44.25 times less return on investment than SPDR Kensho. But when comparing it to its historical volatility, First Trust NASDAQ is 2.11 times less risky than SPDR Kensho. It trades about 0.01 of its potential returns per unit of risk. SPDR Kensho Clean is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,152 in SPDR Kensho Clean on August 30, 2024 and sell it today you would earn a total of 306.00 from holding SPDR Kensho Clean or generate 4.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust NASDAQ vs. SPDR Kensho Clean
Performance |
| Timeline |
| First Trust NASDAQ |
| SPDR Kensho Clean |
First Trust and SPDR Kensho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Kensho
The main advantage of trading using opposite First Trust and SPDR Kensho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Kensho 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 Kensho will offset losses from the drop in SPDR Kensho's long position.| First Trust vs. First Trust Global | First Trust vs. Invesco Global Clean | First Trust vs. ALPS Clean Energy | First Trust vs. SPDR Kensho Clean |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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