Correlation Between First Trust and SPDR MSCI

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

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

Diversification Opportunities for First Trust and SPDR MSCI

0.96

Correlation Coefficient

First Trust  SPDR MSCI

Almost no diversification

The 3 months correlation between First and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust RiverFront and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging 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 RiverFront are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of First Trust i.e., First Trust and SPDR MSCI go up and down completely randomly.

Pair Corralation between First Trust and SPDR MSCI

Given the investment horizon of 90 days First Trust is expected to generate 1.62 times less return on investment than SPDR MSCI. In addition to that, First Trust is 1.1 times more volatile than SPDR MSCI Emerging. It trades about 0.04 of its total potential returns per unit of risk. SPDR MSCI Emerging is currently generating about 0.07 per unit of volatility. If you would invest  5,863  in SPDR MSCI Emerging on February 23, 2025 and sell it today you would earn a total of  268.00  from holding SPDR MSCI Emerging or generate 4.57% 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 RiverFront  vs.  SPDR MSCI Emerging

First Trust RiverFront

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust RiverFront are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SPDR MSCI Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, SPDR MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and SPDR MSCI

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

The idea behind First Trust RiverFront and SPDR MSCI Emerging 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.