Correlation Between First Trust and SPDR FactSet

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

By analyzing existing cross correlation between First Trust NASDAQ and SPDR FactSet Innovative, you can compare the effects of market volatilities on First Trust and SPDR FactSet 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 FactSet. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and SPDR FactSet.

Diversification Opportunities for First Trust and SPDR FactSet

0.92

Correlation Coefficient

First Trust  SPDR FactSet

Almost no diversification

The 3 months correlation between First and SPDR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative 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 NASDAQ are associated (or correlated) with SPDR FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of First Trust i.e., First Trust and SPDR FactSet go up and down completely randomly.

Pair Corralation between First Trust and SPDR FactSet

Given the investment horizon of 90 days First Trust is expected to generate 1.67 times less return on investment than SPDR FactSet. But when comparing it to its historical volatility, First Trust NASDAQ is 1.12 times less risky than SPDR FactSet. It trades about 0.11 of its potential returns per unit of risk. SPDR FactSet Innovative is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,638  in SPDR FactSet Innovative on May 3, 2025 and sell it today you would earn a total of  2,029  from holding SPDR FactSet Innovative or generate 12.19% return on investment over 90 days.

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

First Trust NASDAQ  vs.  SPDR FactSet Innovative

First Trust NASDAQ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

SPDR FactSet Innovative

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FactSet Innovative are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, SPDR FactSet may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with First Trust and SPDR FactSet

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

The idea behind First Trust NASDAQ and SPDR FactSet Innovative 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.