Correlation Between First Trust and SPDR Morgan

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

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

Diversification Opportunities for First Trust and SPDR Morgan

0.99

Correlation Coefficient

First Trust  SPDR Morgan

No risk reduction

The 3 months correlation between First and SPDR is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Technology and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Technology are associated (or correlated) with SPDR Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of First Trust i.e., First Trust and SPDR Morgan go up and down completely randomly.

Pair Corralation between First Trust and SPDR Morgan

Considering the 90-day investment horizon First Trust is expected to generate 1.1 times less return on investment than SPDR Morgan. But when comparing it to its historical volatility, First Trust Technology is 1.05 times less risky than SPDR Morgan. It trades about 0.21 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  20,362  in SPDR Morgan Stanley on May 2, 2025 and sell it today you would earn a total of  3,301  from holding SPDR Morgan Stanley or generate 16.21% 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 Technology  vs.  SPDR Morgan Stanley

First Trust Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, First Trust disclosed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Morgan Stanley

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, SPDR Morgan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and SPDR Morgan

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

The idea behind First Trust Technology and SPDR Morgan Stanley 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.