Correlation Between SPDR SP and First Trust
Can any of the company-specific risk be diversified away by investing in both SPDR SP and First Trust 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 SPDR SP and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and First Trust Multi, you can compare the effects of market volatilities on SPDR SP and First Trust 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 SPDR SP with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and First Trust.
Diversification Opportunities for SPDR SP and First Trust
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and First Trust Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and SPDR SP 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 SPDR SP 400 are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Multi has no effect on the direction of SPDR SP i.e., SPDR SP and First Trust go up and down completely randomly.
Pair Corralation between SPDR SP and First Trust
Given the investment horizon of 90 days SPDR SP is expected to generate 1.53 times less return on investment than First Trust. But when comparing it to its historical volatility, SPDR SP 400 is 1.03 times less risky than First Trust. It trades about 0.2 of its potential returns per unit of risk. First Trust Multi is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 13,528 in First Trust Multi on August 24, 2024 and sell it today you would earn a total of 1,107 from holding First Trust Multi or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 400 vs. First Trust Multi
Performance |
| Timeline |
| SPDR SP 400 |
| First Trust Multi |
SPDR SP and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and First Trust
The main advantage of trading using opposite SPDR SP and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| SPDR SP vs. Vanguard Mid Cap Growth | SPDR SP vs. ARK Innovation ETF | SPDR SP vs. iShares SP Mid Cap | SPDR SP vs. iShares Morningstar Mid Cap |
| First Trust vs. First Trust Multi | First Trust vs. First Trust Small | First Trust vs. First Trust Large | First Trust vs. First Trust Large |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |