Correlation Between PGIM Large and First Trust
Can any of the company-specific risk be diversified away by investing in both PGIM Large 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 PGIM Large and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGIM Large Cap Buffer and First Trust Institutional, you can compare the effects of market volatilities on PGIM Large 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 PGIM Large with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Large and First Trust.
Diversification Opportunities for PGIM Large and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PGIM and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Large Cap Buffer and First Trust Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Institutional and PGIM Large 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 PGIM Large Cap Buffer 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 Institutional has no effect on the direction of PGIM Large i.e., PGIM Large and First Trust go up and down completely randomly.
Pair Corralation between PGIM Large and First Trust
Given the investment horizon of 90 days PGIM Large Cap Buffer is expected to generate 2.1 times more return on investment than First Trust. However, PGIM Large is 2.1 times more volatile than First Trust Institutional. It trades about 0.05 of its potential returns per unit of risk. First Trust Institutional is currently generating about 0.04 per unit of risk. If you would invest 2,742 in PGIM Large Cap Buffer on November 2, 2024 and sell it today you would earn a total of 25.64 from holding PGIM Large Cap Buffer or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Large Cap Buffer vs. First Trust Institutional
Performance |
| Timeline |
| PGIM Large Cap |
| First Trust Institutional |
PGIM Large and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Large and First Trust
The main advantage of trading using opposite PGIM Large and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Large 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.| PGIM Large vs. FT Vest Equity | PGIM Large vs. Northern Lights | PGIM Large vs. Dimensional International High | PGIM Large vs. First Trust Exchange Traded |
| First Trust vs. First Trust Preferred | First Trust vs. First Trust Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced |
Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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