Correlation Between FT Vest and SPDR SP

Can any of the company-specific risk be diversified away by investing in both FT Vest and SPDR SP 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 FT Vest and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Vest Equity and SPDR SP 600, you can compare the effects of market volatilities on FT Vest and SPDR SP 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 FT Vest with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Vest and SPDR SP.

Diversification Opportunities for FT Vest and SPDR SP

-0.1

Correlation Coefficient

FT Vest  SPDR SP

Good diversification

The 3 months correlation between DHDG and SPDR is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding FT Vest Equity and SPDR SP 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 600 and FT Vest 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 FT Vest Equity are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 600 has no effect on the direction of FT Vest i.e., FT Vest and SPDR SP go up and down completely randomly.

Pair Corralation between FT Vest and SPDR SP

Given the investment horizon of 90 days FT Vest is expected to generate 2.66 times less return on investment than SPDR SP. But when comparing it to its historical volatility, FT Vest Equity is 3.38 times less risky than SPDR SP. It trades about 0.18 of its potential returns per unit of risk. SPDR SP 600 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,368  in SPDR SP 600 on September 5, 2024 and sell it today you would earn a total of  1,023  from holding SPDR SP 600 or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

FT Vest Equity  vs.  SPDR SP 600

FT Vest Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SP 600

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 600 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FT Vest and SPDR SP

The main advantage of trading using opposite FT Vest and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Vest position performs unexpectedly, SPDR SP 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 SP will offset losses from the drop in SPDR SP's long position.

The idea behind FT Vest Equity and SPDR SP 600 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.