Correlation Between SSGA Active and First Trust

Can any of the company-specific risk be diversified away by investing in both SSGA Active 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 SSGA Active and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SSGA Active Trust and First Trust Municipal, you can compare the effects of market volatilities on SSGA Active 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 SSGA Active with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSGA Active and First Trust.

Diversification Opportunities for SSGA Active and First Trust

0.9

Correlation Coefficient

SSGA Active  First Trust

Almost no diversification

The 3 months correlation between SSGA and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SSGA Active Trust and First Trust Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Municipal and SSGA Active 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 SSGA Active Trust 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 Municipal has no effect on the direction of SSGA Active i.e., SSGA Active and First Trust go up and down completely randomly.

Pair Corralation between SSGA Active and First Trust

Given the investment horizon of 90 days SSGA Active Trust is expected to generate 0.59 times more return on investment than First Trust. However, SSGA Active Trust is 1.69 times less risky than First Trust. It trades about 0.31 of its potential returns per unit of risk. First Trust Municipal is currently generating about 0.1 per unit of risk. If you would invest  2,953  in SSGA Active Trust on September 5, 2024 and sell it today you would earn a total of  46.00  from holding SSGA Active Trust or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SSGA Active Trust  vs.  First Trust Municipal

SSGA Active Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSGA Active Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SSGA Active is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Municipal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, First Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SSGA Active and First Trust

The main advantage of trading using opposite SSGA Active and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSGA Active 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 SSGA Active Trust and First Trust Municipal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.