Correlation Between Spear Alpha and First Trust

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

By analyzing existing cross correlation between Spear Alpha ETF and First Trust Emerging, you can compare the effects of market volatilities on Spear Alpha 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 Spear Alpha with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spear Alpha and First Trust.

Diversification Opportunities for Spear Alpha and First Trust

0.9

Correlation Coefficient

Spear Alpha  First Trust

Almost no diversification

The 3 months correlation between Spear and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Spear Alpha ETF and First Trust Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Emerging and Spear Alpha 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 Spear Alpha ETF 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 Emerging has no effect on the direction of Spear Alpha i.e., Spear Alpha and First Trust go up and down completely randomly.

Pair Corralation between Spear Alpha and First Trust

Given the investment horizon of 90 days Spear Alpha ETF is expected to generate 3.62 times more return on investment than First Trust. However, Spear Alpha is 3.62 times more volatile than First Trust Emerging. It trades about 0.36 of its potential returns per unit of risk. First Trust Emerging is currently generating about 0.13 per unit of risk. If you would invest  2,134  in Spear Alpha ETF on April 30, 2025 and sell it today you would earn a total of  1,088  from holding Spear Alpha ETF or generate 50.98% return on investment over 90 days.

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

Spear Alpha ETF  vs.  First Trust Emerging

Spear Alpha ETF

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Spear Alpha ETF are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Spear Alpha showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Emerging are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spear Alpha and First Trust

The main advantage of trading using opposite Spear Alpha and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spear Alpha 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.

The idea behind Spear Alpha ETF and First Trust 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..