Correlation Between Ares Dynamic and PGIM Short

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

By analyzing existing cross correlation between Ares Dynamic Credit and PGIM Short Duration, you can compare the effects of market volatilities on Ares Dynamic and PGIM Short 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 Ares Dynamic with a short position of PGIM Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Dynamic and PGIM Short.

Diversification Opportunities for Ares Dynamic and PGIM Short

0.56

Correlation Coefficient

Ares Dynamic  PGIM Short

Very weak diversification

The 3 months correlation between Ares and PGIM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit and PGIM Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Short Duration and Ares Dynamic 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 Ares Dynamic Credit are associated (or correlated) with PGIM Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Short Duration has no effect on the direction of Ares Dynamic i.e., Ares Dynamic and PGIM Short go up and down completely randomly.

Pair Corralation between Ares Dynamic and PGIM Short

Given the investment horizon of 90 days Ares Dynamic Credit is expected to under-perform the PGIM Short. In addition to that, Ares Dynamic is 1.27 times more volatile than PGIM Short Duration. It trades about -0.18 of its total potential returns per unit of risk. PGIM Short Duration is currently generating about -0.17 per unit of volatility. If you would invest  1,649  in PGIM Short Duration on September 23, 2024 and sell it today you would lose (27.00) from holding PGIM Short Duration or give up 1.64% of portfolio value over 90 days.

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

Ares Dynamic Credit  vs.  PGIM Short Duration

Ares Dynamic Credit

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Dynamic Credit are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound fundamental indicators, Ares Dynamic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

PGIM Short Duration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Short Duration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, PGIM Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ares Dynamic and PGIM Short

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

The idea behind Ares Dynamic Credit and PGIM Short Duration 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.