Correlation Between PGIM ETF and First Trust
Can any of the company-specific risk be diversified away by investing in both PGIM ETF 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 ETF 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 ETF Trust and First Trust Low, you can compare the effects of market volatilities on PGIM ETF 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 ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM ETF and First Trust.
Diversification Opportunities for PGIM ETF and First Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PGIM and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding PGIM ETF Trust and First Trust Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Low and PGIM ETF 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 ETF Trust 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 Low has no effect on the direction of PGIM ETF i.e., PGIM ETF and First Trust go up and down completely randomly.
Pair Corralation between PGIM ETF and First Trust
Given the investment horizon of 90 days PGIM ETF Trust is expected to generate 1.89 times more return on investment than First Trust. However, PGIM ETF is 1.89 times more volatile than First Trust Low. It trades about 0.11 of its potential returns per unit of risk. First Trust Low is currently generating about 0.06 per unit of risk. If you would invest 4,150 in PGIM ETF Trust on August 30, 2024 and sell it today you would earn a total of 37.00 from holding PGIM ETF Trust or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM ETF Trust vs. First Trust Low
Performance |
| Timeline |
| PGIM ETF Trust |
| First Trust Low |
PGIM ETF and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM ETF and First Trust
The main advantage of trading using opposite PGIM ETF and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM ETF 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 ETF vs. SSGA Active Trust | PGIM ETF vs. BlackRock Intermediate Muni | PGIM ETF vs. iShares BBB Rated | PGIM ETF vs. Xtrackers Short Duration |
| First Trust vs. FlexShares Disciplined Duration | First Trust vs. Vanguard Mortgage Backed Securities | First Trust vs. Simplify Exchange Traded | First Trust vs. WisdomTree Mortgage Plus |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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