Correlation Between Western Asset and PGIM Short

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

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

Diversification Opportunities for Western Asset and PGIM Short

-0.64

Correlation Coefficient

Western Asset  PGIM Short

Excellent diversification

The 3 months correlation between Western and PGIM is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global 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 Western Asset 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 Western Asset Global 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 Western Asset i.e., Western Asset and PGIM Short go up and down completely randomly.

Pair Corralation between Western Asset and PGIM Short

Considering the 90-day investment horizon Western Asset Global is expected to under-perform the PGIM Short. In addition to that, Western Asset is 1.18 times more volatile than PGIM Short Duration. It trades about -0.21 of its total potential returns per unit of risk. PGIM Short Duration is currently generating about 0.06 per unit of volatility. If you would invest  1,644  in PGIM Short Duration on September 4, 2024 and sell it today you would earn a total of  18.00  from holding PGIM Short Duration or generate 1.09% return on investment over 90 days.

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

Western Asset Global  vs.  PGIM Short Duration

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PGIM Short Duration

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Short Duration are ranked lower than 12 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and PGIM Short

The main advantage of trading using opposite Western Asset and PGIM Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Global 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.