Correlation Between First Trust and SPDR Barclays
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR Barclays 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 Barclays 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 Barclays 10, you can compare the effects of market volatilities on First Trust and SPDR Barclays 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 Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR Barclays.
Diversification Opportunities for First Trust and SPDR Barclays
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and SPDR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 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 Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of First Trust i.e., First Trust and SPDR Barclays go up and down completely randomly.
Pair Corralation between First Trust and SPDR Barclays
Assuming the 90 days trading horizon First Trust Nasdaq is expected to generate 2.39 times more return on investment than SPDR Barclays. However, First Trust is 2.39 times more volatile than SPDR Barclays 10. It trades about 0.16 of its potential returns per unit of risk. SPDR Barclays 10 is currently generating about 0.09 per unit of risk. If you would invest 1,287 in First Trust Nasdaq on September 1, 2024 and sell it today you would earn a total of 89.00 from holding First Trust Nasdaq or generate 6.92% 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 Nasdaq vs. SPDR Barclays 10
Performance |
| Timeline |
| First Trust Nasdaq |
| SPDR Barclays 10 |
First Trust and SPDR Barclays Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and SPDR Barclays
The main advantage of trading using opposite First Trust and SPDR Barclays positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR Barclays 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 Barclays will offset losses from the drop in SPDR Barclays' long position.| First Trust vs. Scottish Mortgage Investment | First Trust vs. VinaCapital Vietnam Opportunity | First Trust vs. Edinburgh Worldwide Investment | First Trust vs. Baillie Gifford Growth |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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