Correlation Between Prudential Health and First Trust

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

By analyzing existing cross correlation between Prudential Health Sciences and First Trust Managed, you can compare the effects of market volatilities on Prudential Health 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 Prudential Health with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and First Trust.

Diversification Opportunities for Prudential Health and First Trust

0.22

Correlation Coefficient

Prudential Health  First Trust

Modest diversification

The 3 months correlation between Prudential and First is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Prudential Health 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 Prudential Health Sciences 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 Managed has no effect on the direction of Prudential Health i.e., Prudential Health and First Trust go up and down completely randomly.

Pair Corralation between Prudential Health and First Trust

Assuming the 90 days horizon Prudential Health Sciences is expected to generate 10.68 times more return on investment than First Trust. However, Prudential Health is 10.68 times more volatile than First Trust Managed. It trades about 0.05 of its potential returns per unit of risk. First Trust Managed is currently generating about -0.08 per unit of risk. If you would invest  2,952  in Prudential Health Sciences on May 1, 2025 and sell it today you would earn a total of  93.00  from holding Prudential Health Sciences or generate 3.15% return on investment over 90 days.

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

Prudential Health Sciences  vs.  First Trust Managed

Prudential Health

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Health Sciences are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Health and First Trust

The main advantage of trading using opposite Prudential Health and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health 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 Prudential Health Sciences and First Trust Managed 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.