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 Senior, 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
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPDR and First is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 Senior 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 is expected to generate 1.07 times less return on investment than First Trust. In addition to that, SPDR ICE is 4.4 times more volatile than First Trust Senior. It trades about 0.06 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.27 per unit of volatility. If you would invest 4,045 in First Trust Senior on September 1, 2024 and sell it today you would earn a total of 586.00 from holding First Trust Senior or generate 14.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR ICE Preferred vs. First Trust Senior
Performance |
| Timeline |
| SPDR ICE Preferred |
| First Trust Senior |
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. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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