Correlation Between SPDR Morgan and First Trust

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

Diversification Opportunities for SPDR Morgan and First Trust

0.91

Correlation Coefficient

SPDR Morgan  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 Morgan Stanley and First Trust Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Technology and SPDR Morgan 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 Morgan Stanley 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 Technology has no effect on the direction of SPDR Morgan i.e., SPDR Morgan and First Trust go up and down completely randomly.

Pair Corralation between SPDR Morgan and First Trust

Given the investment horizon of 90 days SPDR Morgan Stanley is expected to generate 0.9 times more return on investment than First Trust. However, SPDR Morgan Stanley is 1.11 times less risky than First Trust. It trades about 0.3 of its potential returns per unit of risk. First Trust Technology is currently generating about 0.11 per unit of risk. If you would invest  23,564  in SPDR Morgan Stanley on July 6, 2025 and sell it today you would earn a total of  4,418  from holding SPDR Morgan Stanley or generate 18.75% return on investment over 90 days.

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

SPDR Morgan Stanley  vs.  First Trust Technology

SPDR Morgan Stanley

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, SPDR Morgan disclosed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Technology

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with SPDR Morgan and First Trust

The main advantage of trading using opposite SPDR Morgan and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Morgan 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 Morgan Stanley and First Trust Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.