Correlation Between SPDR DoubleLine and First Trust

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

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

Diversification Opportunities for SPDR DoubleLine and First Trust

0.91

Correlation Coefficient

SPDR DoubleLine  First Trust

Almost no diversification

The 3 months correlation between SPDR and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR DoubleLine Total and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and SPDR DoubleLine 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 SPDR DoubleLine Total 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 TCW has no effect on the direction of SPDR DoubleLine i.e., SPDR DoubleLine and First Trust go up and down completely randomly.

Pair Corralation between SPDR DoubleLine and First Trust

Given the investment horizon of 90 days SPDR DoubleLine is expected to generate 1.34 times less return on investment than First Trust. But when comparing it to its historical volatility, SPDR DoubleLine Total is 1.29 times less risky than First Trust. It trades about 0.08 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,292  in First Trust TCW on May 2, 2025 and sell it today you would earn a total of  67.00  from holding First Trust TCW or generate 1.56% return on investment over 90 days.

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

SPDR DoubleLine Total  vs.  First Trust TCW

SPDR DoubleLine Total

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Total are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Trust TCW

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR DoubleLine and First Trust

The main advantage of trading using opposite SPDR DoubleLine and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR DoubleLine 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 SPDR DoubleLine Total and First Trust TCW 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.