Correlation Between PGIM Ultra and First Trust

Can any of the company-specific risk be diversified away by investing in both PGIM Ultra 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 Ultra 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 Ultra Short and First Trust Europe, you can compare the effects of market volatilities on PGIM Ultra 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 Ultra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Ultra and First Trust.

Diversification Opportunities for PGIM Ultra and First Trust

-0.6

Correlation Coefficient

PGIM Ultra  First Trust

Excellent diversification

The 3 months correlation between PGIM and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Ultra Short and First Trust Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Europe and PGIM Ultra 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 Ultra Short 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 Europe has no effect on the direction of PGIM Ultra i.e., PGIM Ultra and First Trust go up and down completely randomly.

Pair Corralation between PGIM Ultra and First Trust

Given the investment horizon of 90 days PGIM Ultra Short is expected to generate 0.04 times more return on investment than First Trust. However, PGIM Ultra Short is 26.87 times less risky than First Trust. It trades about 0.63 of its potential returns per unit of risk. First Trust Europe is currently generating about -0.02 per unit of risk. If you would invest  4,911  in PGIM Ultra Short on September 3, 2024 and sell it today you would earn a total of  68.00  from holding PGIM Ultra Short or generate 1.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PGIM Ultra Short  vs.  First Trust Europe

PGIM Ultra Short

Risk-Adjusted Performance

49 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Ultra Short are ranked lower than 49 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, PGIM Ultra is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PGIM Ultra and First Trust

The main advantage of trading using opposite PGIM Ultra and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Ultra 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.

The idea behind PGIM Ultra Short and First Trust Europe 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.

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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.