Correlation Between Prudential Qma and First Trust

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

Diversification Opportunities for Prudential Qma and First Trust

0.95

Correlation Coefficient

Prudential Qma  First Trust

Almost no diversification

The 3 months correlation between Prudential and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Qma Large Cap and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Prudential Qma 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 Qma Large Cap 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 Short has no effect on the direction of Prudential Qma i.e., Prudential Qma and First Trust go up and down completely randomly.

Pair Corralation between Prudential Qma and First Trust

Assuming the 90 days horizon Prudential Qma Large Cap is expected to generate 4.66 times more return on investment than First Trust. However, Prudential Qma is 4.66 times more volatile than First Trust Short. It trades about 0.22 of its potential returns per unit of risk. First Trust Short is currently generating about 0.17 per unit of risk. If you would invest  2,278  in Prudential Qma Large Cap on July 1, 2025 and sell it today you would earn a total of  181.00  from holding Prudential Qma Large Cap or generate 7.95% return on investment over 90 days.

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

Prudential Qma Large Cap  vs.  First Trust Short

Prudential Qma Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Qma Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Qma may actually be approaching a critical reversion point that can send shares even higher in October 2025.

First Trust Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Qma and First Trust

The main advantage of trading using opposite Prudential Qma and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Qma 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 Qma Large Cap and First Trust Short 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.