Correlation Between FT Cboe and PGIM Laddered

Can any of the company-specific risk be diversified away by investing in both FT Cboe and PGIM Laddered 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 FT Cboe and PGIM Laddered into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FT Cboe Vest and PGIM Laddered, you can compare the effects of market volatilities on FT Cboe and PGIM Laddered 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 FT Cboe with a short position of PGIM Laddered. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and PGIM Laddered.

Diversification Opportunities for FT Cboe and PGIM Laddered

0.97

Correlation Coefficient

FT Cboe  PGIM Laddered

Almost no diversification

The 3 months correlation between BUFD and PGIM is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding FT Cboe Vest and PGIM Laddered in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Laddered and FT Cboe 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 FT Cboe Vest are associated (or correlated) with PGIM Laddered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Laddered has no effect on the direction of FT Cboe i.e., FT Cboe and PGIM Laddered go up and down completely randomly.

Pair Corralation between FT Cboe and PGIM Laddered

Given the investment horizon of 90 days FT Cboe Vest is expected to under-perform the PGIM Laddered. In addition to that, FT Cboe is 1.4 times more volatile than PGIM Laddered. It trades about -0.05 of its total potential returns per unit of risk. PGIM Laddered is currently generating about 0.0 per unit of volatility. If you would invest  2,655  in PGIM Laddered on December 27, 2024 and sell it today you would earn a total of  0.00  from holding PGIM Laddered or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

FT Cboe Vest  vs.  PGIM Laddered

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

PGIM Laddered

Risk-Adjusted Performance

Very Weak

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

Pair Trading with FT Cboe and PGIM Laddered

The main advantage of trading using opposite FT Cboe and PGIM Laddered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe position performs unexpectedly, PGIM Laddered 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 Laddered will offset losses from the drop in PGIM Laddered's long position.

The idea behind FT Cboe Vest and PGIM Laddered 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.