Correlation Between PGIM Rock and First Trust
Can any of the company-specific risk be diversified away by investing in both PGIM Rock 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 Rock 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 Rock ETF and First Trust Cboe, you can compare the effects of market volatilities on PGIM Rock 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 Rock with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Rock and First Trust.
Diversification Opportunities for PGIM Rock and First Trust
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PGIM and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Rock ETF and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and PGIM Rock 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 Rock ETF 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 Cboe has no effect on the direction of PGIM Rock i.e., PGIM Rock and First Trust go up and down completely randomly.
Pair Corralation between PGIM Rock and First Trust
Given the investment horizon of 90 days PGIM Rock is expected to generate 1.45 times less return on investment than First Trust. But when comparing it to its historical volatility, PGIM Rock ETF is 1.5 times less risky than First Trust. It trades about 0.19 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,567 in First Trust Cboe on September 14, 2024 and sell it today you would earn a total of 507.00 from holding First Trust Cboe or generate 19.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 89.22% |
| Values | Daily Returns |
PGIM Rock ETF vs. First Trust Cboe
Performance |
| Timeline |
| PGIM Rock ETF |
| First Trust Cboe |
PGIM Rock and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Rock and First Trust
The main advantage of trading using opposite PGIM Rock and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Rock 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 Rock vs. First Trust Cboe | PGIM Rock vs. FT Cboe Vest | PGIM Rock vs. Innovator SP 500 | PGIM Rock vs. Innovator SP 500 |
| 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 |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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