Correlation Between First Trust and SPAC

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

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

Diversification Opportunities for First Trust and SPAC

-0.4

Correlation Coefficient

First Trust  SPAC

Very good diversification

The 3 months correlation between First and SPAC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Vivaldi and SPAC and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAC and New 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 Vivaldi are associated (or correlated) with SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAC and New has no effect on the direction of First Trust i.e., First Trust and SPAC go up and down completely randomly.

Pair Corralation between First Trust and SPAC

Given the investment horizon of 90 days First Trust Vivaldi is expected to generate 0.46 times more return on investment than SPAC. However, First Trust Vivaldi is 2.16 times less risky than SPAC. It trades about 0.1 of its potential returns per unit of risk. SPAC and New is currently generating about -0.01 per unit of risk. If you would invest  2,018  in First Trust Vivaldi on May 17, 2025 and sell it today you would earn a total of  60.00  from holding First Trust Vivaldi or generate 2.97% return on investment over 90 days.

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

First Trust Vivaldi  vs.  SPAC and New

First Trust Vivaldi

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Vivaldi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPAC and New

Risk-Adjusted Performance

Weakest

Over the last 90 days SPAC and New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPAC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and SPAC

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

The idea behind First Trust Vivaldi and SPAC and New 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.