Correlation Between SPDR ICE and First Trust
Can any of the company-specific risk be diversified away by investing in both SPDR ICE 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 ICE 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 ICE Preferred and First Trust Preferred, you can compare the effects of market volatilities on SPDR ICE 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 ICE with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR ICE and First Trust.
Diversification Opportunities for SPDR ICE and First Trust
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred and SPDR ICE 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 ICE Preferred 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 Preferred has no effect on the direction of SPDR ICE i.e., SPDR ICE and First Trust go up and down completely randomly.
Pair Corralation between SPDR ICE and First Trust
Considering the 90-day investment horizon SPDR ICE Preferred is expected to generate 2.72 times more return on investment than First Trust. However, SPDR ICE is 2.72 times more volatile than First Trust Preferred. It trades about 0.05 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.11 per unit of risk. If you would invest 3,312 in SPDR ICE Preferred on October 23, 2024 and sell it today you would earn a total of 24.00 from holding SPDR ICE Preferred or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
SPDR ICE Preferred vs. First Trust Preferred
Performance |
| Timeline |
| SPDR ICE Preferred |
| First Trust Preferred |
SPDR ICE and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR ICE and First Trust
The main advantage of trading using opposite SPDR ICE and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR ICE 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 ICE vs. VanEck Preferred Securities | SPDR ICE vs. Invesco Preferred ETF | SPDR ICE vs. Invesco Financial Preferred | SPDR ICE vs. Global X SuperIncome |
| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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