Correlation Between FT Cboe and PGIM Rock
Can any of the company-specific risk be diversified away by investing in both FT Cboe and PGIM Rock 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 FT Cboe and PGIM Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and PGIM Rock ETF, you can compare the effects of market volatilities on FT Cboe and PGIM Rock 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 FT Cboe with a short position of PGIM Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and PGIM Rock.
Diversification Opportunities for FT Cboe and PGIM Rock
No risk reduction
The 3 months correlation between BUFD and PGIM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and PGIM Rock ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Rock ETF and FT Cboe 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 FT Cboe Vest are associated (or correlated) with PGIM Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Rock ETF has no effect on the direction of FT Cboe i.e., FT Cboe and PGIM Rock go up and down completely randomly.
Pair Corralation between FT Cboe and PGIM Rock
Given the investment horizon of 90 days FT Cboe is expected to generate 1.52 times less return on investment than PGIM Rock. But when comparing it to its historical volatility, FT Cboe Vest is 1.15 times less risky than PGIM Rock. It trades about 0.15 of its potential returns per unit of risk. PGIM Rock ETF is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,761 in PGIM Rock ETF on August 28, 2024 and sell it today you would earn a total of 45.00 from holding PGIM Rock ETF or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FT Cboe Vest vs. PGIM Rock ETF
Performance |
| Timeline |
| FT Cboe Vest |
| PGIM Rock ETF |
FT Cboe and PGIM Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FT Cboe and PGIM Rock
The main advantage of trading using opposite FT Cboe and PGIM Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, PGIM Rock 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 PGIM Rock will offset losses from the drop in PGIM Rock's long position.The idea behind FT Cboe Vest and PGIM Rock ETF 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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