Correlation Between Innovator Laddered and PGIM ETF

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

By analyzing existing cross correlation between Innovator Laddered Allocation and PGIM ETF Trust, you can compare the effects of market volatilities on Innovator Laddered and PGIM ETF 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 Innovator Laddered with a short position of PGIM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Laddered and PGIM ETF.

Diversification Opportunities for Innovator Laddered and PGIM ETF

0.41

Correlation Coefficient

Innovator Laddered  PGIM ETF

Very weak diversification

The 3 months correlation between Innovator and PGIM is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Laddered Allocation and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust and Innovator Laddered 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 Innovator Laddered Allocation are associated (or correlated) with PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of Innovator Laddered i.e., Innovator Laddered and PGIM ETF go up and down completely randomly.

Pair Corralation between Innovator Laddered and PGIM ETF

Given the investment horizon of 90 days Innovator Laddered Allocation is expected to under-perform the PGIM ETF. But the etf apears to be less risky and, when comparing its historical volatility, Innovator Laddered Allocation is 2.42 times less risky than PGIM ETF. The etf trades about -0.06 of its potential returns per unit of risk. The PGIM ETF Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,247  in PGIM ETF Trust on December 29, 2024 and sell it today you would earn a total of  160.00  from holding PGIM ETF Trust or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Innovator Laddered Allocation  vs.  PGIM ETF Trust

Innovator Laddered

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Laddered Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Innovator Laddered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PGIM ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, PGIM ETF is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Innovator Laddered and PGIM ETF

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

The idea behind Innovator Laddered Allocation and PGIM ETF Trust 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.