Correlation Between First Trust and SPDR SSgA
Can any of the company-specific risk be diversified away by investing in both First Trust and SPDR SSgA 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 SSgA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and SPDR SSgA Global, you can compare the effects of market volatilities on First Trust and SPDR SSgA 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 SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR SSgA.
Diversification Opportunities for First Trust and SPDR SSgA
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and SPDR is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and SPDR SSgA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Global 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 Emerging are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Global has no effect on the direction of First Trust i.e., First Trust and SPDR SSgA go up and down completely randomly.
Pair Corralation between First Trust and SPDR SSgA
Given the investment horizon of 90 days First Trust is expected to generate 10.02 times less return on investment than SPDR SSgA. In addition to that, First Trust is 1.06 times more volatile than SPDR SSgA Global. It trades about 0.01 of its total potential returns per unit of risk. SPDR SSgA Global is currently generating about 0.09 per unit of volatility. If you would invest 4,298 in SPDR SSgA Global on September 19, 2024 and sell it today you would earn a total of 247.00 from holding SPDR SSgA Global or generate 5.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Emerging vs. SPDR SSgA Global
Performance |
Timeline |
First Trust Emerging |
SPDR SSgA Global |
First Trust and SPDR SSgA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and SPDR SSgA
The main advantage of trading using opposite First Trust and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, SPDR SSgA 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 SSgA will offset losses from the drop in SPDR SSgA's long position.First Trust vs. First Trust SSI | First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Managed | First Trust vs. First Trust Tactical |
SPDR SSgA vs. First Trust BuyWrite | SPDR SSgA vs. First Trust Emerging | SPDR SSgA vs. First Trust SSI | SPDR SSgA vs. First Trust Alternative |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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