Correlation Between First Trust and SPDR Blackstone

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

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

Diversification Opportunities for First Trust and SPDR Blackstone

0.98

Correlation Coefficient

First Trust  SPDR Blackstone

Almost no diversification

The 3 months correlation between First and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and SPDR Blackstone Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Blackstone Senior 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 Senior are associated (or correlated) with SPDR Blackstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Blackstone Senior has no effect on the direction of First Trust i.e., First Trust and SPDR Blackstone go up and down completely randomly.

Pair Corralation between First Trust and SPDR Blackstone

Given the investment horizon of 90 days First Trust is expected to generate 1.28 times less return on investment than SPDR Blackstone. In addition to that, First Trust is 1.12 times more volatile than SPDR Blackstone Senior. It trades about 0.27 of its total potential returns per unit of risk. SPDR Blackstone Senior is currently generating about 0.39 per unit of volatility. If you would invest  4,094  in SPDR Blackstone Senior on August 30, 2024 and sell it today you would earn a total of  106.00  from holding SPDR Blackstone Senior or generate 2.59% 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 Senior  vs.  SPDR Blackstone Senior

First Trust Senior

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

SPDR Blackstone Senior

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Blackstone Senior are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, SPDR Blackstone 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 Blackstone

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

The idea behind First Trust Senior and SPDR Blackstone Senior 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.