Correlation Between North American and Pgim High

Can any of the company-specific risk be diversified away by investing in both North American and Pgim High 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 North American and Pgim High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North American Financial and Pgim High Yield, you can compare the effects of market volatilities on North American and Pgim High 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 North American with a short position of Pgim High. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Pgim High.

Diversification Opportunities for North American and Pgim High

-0.1

Correlation Coefficient

North American  Pgim High

Good diversification

The 3 months correlation between North and Pgim is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Pgim High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim High Yield and North American 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 North American Financial are associated (or correlated) with Pgim High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim High Yield has no effect on the direction of North American i.e., North American and Pgim High go up and down completely randomly.

Pair Corralation between North American and Pgim High

Assuming the 90 days horizon North American Financial is expected to under-perform the Pgim High. In addition to that, North American is 4.5 times more volatile than Pgim High Yield. It trades about -0.05 of its total potential returns per unit of risk. Pgim High Yield is currently generating about 0.13 per unit of volatility. If you would invest  1,355  in Pgim High Yield on December 28, 2024 and sell it today you would earn a total of  65.00  from holding Pgim High Yield or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

North American Financial  vs.  Pgim High Yield

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pgim High Yield

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Pgim High is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with North American and Pgim High

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

The idea behind North American Financial and Pgim High Yield 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.

Check out your portfolio center.

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.