Correlation Between SPDR Barclays and First Trust
Can any of the company-specific risk be diversified away by investing in both SPDR Barclays 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 Barclays 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 Barclays Short and First Trust Low, you can compare the effects of market volatilities on SPDR Barclays 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 Barclays with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and First Trust.
Diversification Opportunities for SPDR Barclays and First Trust
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Short and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low and SPDR Barclays 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 Barclays Short 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 Low has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and First Trust go up and down completely randomly.
Pair Corralation between SPDR Barclays and First Trust
Given the investment horizon of 90 days SPDR Barclays Short is expected to generate 0.49 times more return on investment than First Trust. However, SPDR Barclays Short is 2.05 times less risky than First Trust. It trades about -0.07 of its potential returns per unit of risk. First Trust Low is currently generating about -0.09 per unit of risk. If you would invest 2,959 in SPDR Barclays Short on January 19, 2024 and sell it today you would lose (5.50) from holding SPDR Barclays Short or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Barclays Short vs. First Trust Low
Performance |
| Timeline |
| SPDR Barclays Short |
| First Trust Low |
SPDR Barclays and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Barclays and First Trust
The main advantage of trading using opposite SPDR Barclays and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Barclays 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.| SPDR Barclays vs. Vanguard Intermediate Term Bond | SPDR Barclays vs. Vanguard Long Term Bond | SPDR Barclays vs. Vanguard Total Bond | SPDR Barclays vs. Vanguard Intermediate Term Corporate |
| First Trust vs. Vanguard Intermediate Term Treasury | First Trust vs. Vanguard Long Term Treasury | First Trust vs. Vanguard Short Term Corporate | First Trust vs. Vanguard Short Term Inflation Protected |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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