Correlation Between First Trust and Pgim Global

Can any of the company-specific risk be diversified away by investing in both First Trust and Pgim Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Senior and Pgim Global High, you can compare the effects of market volatilities on First Trust and Pgim Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Pgim Global.

Diversification Opportunities for First Trust and Pgim Global

0.48

Correlation Coefficient

First Trust  Pgim Global

Very weak diversification

The 3 months correlation between First and Pgim is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Pgim Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Global High 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 Senior are associated (or correlated) with Pgim Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Global High has no effect on the direction of First Trust i.e., First Trust and Pgim Global go up and down completely randomly.

Pair Corralation between First Trust and Pgim Global

Considering the 90-day investment horizon First Trust is expected to generate 1.88 times less return on investment than Pgim Global. But when comparing it to its historical volatility, First Trust Senior is 1.31 times less risky than Pgim Global. It trades about 0.07 of its potential returns per unit of risk. Pgim Global High is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,229  in Pgim Global High on September 4, 2024 and sell it today you would earn a total of  51.00  from holding Pgim Global High or generate 4.15% return on investment over 90 days.

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

First Trust Senior  vs.  Pgim Global High

First Trust Senior

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pgim Global High

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim Global High are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Pgim Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Pgim Global

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

The idea behind First Trust Senior and Pgim Global High 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.