Correlation Between First Trust and PGIM Rock
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and PGIM Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Cboe and PGIM Rock ETF, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of PGIM Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and PGIM Rock.
Diversification Opportunities for First Trust and PGIM Rock
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and PGIM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cboe 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 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 Cboe 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 First Trust i.e., First Trust and PGIM Rock go up and down completely randomly.
Pair Corralation between First Trust and PGIM Rock
Given the investment horizon of 90 days First Trust Cboe is expected to generate 1.55 times more return on investment than PGIM Rock. However, First Trust is 1.55 times more volatile than PGIM Rock ETF. It trades about 0.2 of its potential returns per unit of risk. PGIM Rock ETF is currently generating about 0.23 per unit of risk. If you would invest 3,010 in First Trust Cboe on August 30, 2024 and sell it today you would earn a total of 51.00 from holding First Trust Cboe or generate 1.69% 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 Cboe vs. PGIM Rock ETF
Performance |
| Timeline |
| First Trust Cboe |
| PGIM Rock ETF |
First Trust and PGIM Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and PGIM Rock
The main advantage of trading using opposite First Trust and PGIM Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. FT Cboe Vest | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
| PGIM Rock vs. ABIVAX Socit Anonyme | PGIM Rock vs. Pinnacle Sherman Multi Strategy | PGIM Rock vs. Morningstar Unconstrained Allocation | PGIM Rock vs. SPACE |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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