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 Low and SPDR Bloomberg High, 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
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and SPDR is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Low and SPDR Bloomberg High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg High 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 Low 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 High 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 Low is expected to under-perform the SPDR Bloomberg. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Low is 1.16 times less risky than SPDR Bloomberg. The etf trades about -0.11 of its potential returns per unit of risk. The SPDR Bloomberg High is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9,673 in SPDR Bloomberg High on August 28, 2024 and sell it today you would earn a total of 13.00 from holding SPDR Bloomberg High or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Low vs. SPDR Bloomberg High
Performance |
| Timeline |
| First Trust Low |
| SPDR Bloomberg High |
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.The idea behind First Trust Low and SPDR Bloomberg High pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SPDR Bloomberg vs. First Trust Senior | SPDR Bloomberg vs. First Trust Low | SPDR Bloomberg vs. First Trust Enhanced | SPDR Bloomberg vs. First Trust TCW |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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