Correlation Between SPDR FTSE and First Trust

Can any of the company-specific risk be diversified away by investing in both SPDR FTSE 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 FTSE 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 FTSE International and First Trust Structured, you can compare the effects of market volatilities on SPDR FTSE 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 FTSE with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR FTSE and First Trust.

Diversification Opportunities for SPDR FTSE and First Trust

0.87

Correlation Coefficient

SPDR FTSE  First Trust

Very poor diversification

The 3 months correlation between SPDR and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FTSE International and First Trust Structured in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Structured and SPDR FTSE 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 FTSE International 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 Structured has no effect on the direction of SPDR FTSE i.e., SPDR FTSE and First Trust go up and down completely randomly.

Pair Corralation between SPDR FTSE and First Trust

Considering the 90-day investment horizon SPDR FTSE is expected to generate 1.42 times less return on investment than First Trust. In addition to that, SPDR FTSE is 1.92 times more volatile than First Trust Structured. It trades about 0.05 of its total potential returns per unit of risk. First Trust Structured is currently generating about 0.14 per unit of volatility. If you would invest  2,002  in First Trust Structured on April 28, 2025 and sell it today you would earn a total of  55.00  from holding First Trust Structured or generate 2.75% return on investment over 90 days.

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

SPDR FTSE International  vs.  First Trust Structured

SPDR FTSE International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FTSE International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, SPDR FTSE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Trust Structured

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Structured are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR FTSE and First Trust

The main advantage of trading using opposite SPDR FTSE and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR FTSE 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 FTSE International and First Trust Structured 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.