Correlation Between First Trust and PGIM ETF
Can any of the company-specific risk be diversified away by investing in both First Trust and PGIM ETF 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 ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and PGIM ETF Trust, you can compare the effects of market volatilities on First Trust and PGIM ETF 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 ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and PGIM ETF.
Diversification Opportunities for First Trust and PGIM ETF
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and PGIM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust 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 Exchange Traded are associated (or correlated) with PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of First Trust i.e., First Trust and PGIM ETF go up and down completely randomly.
Pair Corralation between First Trust and PGIM ETF
Given the investment horizon of 90 days First Trust is expected to generate 16.7 times less return on investment than PGIM ETF. But when comparing it to its historical volatility, First Trust Exchange Traded is 20.36 times less risky than PGIM ETF. It trades about 0.02 of its potential returns per unit of risk. PGIM ETF Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 12,754 in PGIM ETF Trust on August 26, 2024 and sell it today you would lose (7,619) from holding PGIM ETF Trust or give up 59.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.48% |
| Values | Daily Returns |
First Trust Exchange Traded vs. PGIM ETF Trust
Performance |
| Timeline |
| First Trust Exchange |
| PGIM ETF Trust |
First Trust and PGIM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and PGIM ETF
The main advantage of trading using opposite First Trust and PGIM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, PGIM ETF 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 ETF will offset losses from the drop in PGIM ETF's long position.| First Trust vs. Vanguard Long Term Treasury | First Trust vs. Vanguard Short Term Treasury | First Trust vs. Vanguard Intermediate Term Corporate | First Trust vs. Vanguard Mortgage Backed Securities |
| PGIM ETF vs. First Trust Exchange Traded | PGIM ETF vs. Vanguard Intermediate Term Treasury | PGIM ETF vs. Vanguard Long Term Treasury | PGIM ETF vs. Vanguard Short Term Treasury |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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