Correlation Between FT Cboe and SPDR Russell

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

By analyzing existing cross correlation between FT Cboe Vest and SPDR Russell 1000, you can compare the effects of market volatilities on FT Cboe and SPDR Russell 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 Cboe with a short position of SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and SPDR Russell.

Diversification Opportunities for FT Cboe and SPDR Russell

-0.31

Correlation Coefficient

FT Cboe  SPDR Russell

Very good diversification

The 3 months correlation between IGLD and SPDR is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 and FT Cboe 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 Cboe Vest are associated (or correlated) with SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of FT Cboe i.e., FT Cboe and SPDR Russell go up and down completely randomly.

Pair Corralation between FT Cboe and SPDR Russell

Given the investment horizon of 90 days FT Cboe Vest is expected to generate 0.77 times more return on investment than SPDR Russell. However, FT Cboe Vest is 1.31 times less risky than SPDR Russell. It trades about -0.04 of its potential returns per unit of risk. SPDR Russell 1000 is currently generating about -0.25 per unit of risk. If you would invest  1,887  in FT Cboe Vest on October 9, 2024 and sell it today you would lose (12.00) from holding FT Cboe Vest or give up 0.64% of portfolio value over 90 days.

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

FT Cboe Vest  vs.  SPDR Russell 1000

FT Cboe Vest

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR Russell 1000

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FT Cboe and SPDR Russell

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

The idea behind FT Cboe Vest and SPDR Russell 1000 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.