Correlation Between Vanguard Total and PGIM Short

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

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

Diversification Opportunities for Vanguard Total and PGIM Short

-0.47

Correlation Coefficient

Vanguard Total  PGIM Short

Very good diversification

The 3 months correlation between Vanguard and PGIM is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond 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 Vanguard Total 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 Vanguard Total Bond 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 Vanguard Total i.e., Vanguard Total and PGIM Short go up and down completely randomly.

Pair Corralation between Vanguard Total and PGIM Short

Considering the 90-day investment horizon Vanguard Total Bond is expected to generate 2.7 times more return on investment than PGIM Short. However, Vanguard Total is 2.7 times more volatile than PGIM Short Duration. It trades about 0.07 of its potential returns per unit of risk. PGIM Short Duration is currently generating about 0.19 per unit of risk. If you would invest  7,290  in Vanguard Total Bond on August 30, 2024 and sell it today you would earn a total of  43.00  from holding Vanguard Total Bond or generate 0.59% return on investment over 90 days.

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

Vanguard Total Bond  vs.  PGIM Short Duration

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Short Duration are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, PGIM Short is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Total and PGIM Short

The main advantage of trading using opposite Vanguard Total and PGIM Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total Bond 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.