Correlation Between SPDR Bloomberg and First Trust

Can any of the company-specific risk be diversified away by investing in both SPDR Bloomberg 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 Bloomberg 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 Bloomberg Emerging and First Trust SSI, you can compare the effects of market volatilities on SPDR Bloomberg 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 Bloomberg with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Bloomberg and First Trust.

Diversification Opportunities for SPDR Bloomberg and First Trust

-0.7

Correlation Coefficient

SPDR Bloomberg  First Trust

Excellent diversification

The 3 months correlation between SPDR and First is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Emerging and First Trust SSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SSI and SPDR Bloomberg 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 Bloomberg Emerging 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 SSI has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and First Trust go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and First Trust

Given the investment horizon of 90 days SPDR Bloomberg is expected to generate 2.49 times less return on investment than First Trust. But when comparing it to its historical volatility, SPDR Bloomberg Emerging is 1.17 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust SSI is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,092  in First Trust SSI on September 13, 2024 and sell it today you would earn a total of  726.00  from holding First Trust SSI or generate 23.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SPDR Bloomberg Emerging  vs.  First Trust SSI

SPDR Bloomberg Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust SSI

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SSI are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR Bloomberg and First Trust

The main advantage of trading using opposite SPDR Bloomberg and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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.

The idea behind SPDR Bloomberg Emerging and First Trust SSI 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .