Correlation Between PGIM Large and Innovator ETFs

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

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

Diversification Opportunities for PGIM Large and Innovator ETFs

-0.22

Correlation Coefficient

PGIM Large  Innovator ETFs

Very good diversification

The 3 months correlation between PGIM and Innovator is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Large Cap Buffer and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs Trust and PGIM Large 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 PGIM Large Cap Buffer are associated (or correlated) with Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of PGIM Large i.e., PGIM Large and Innovator ETFs go up and down completely randomly.

Pair Corralation between PGIM Large and Innovator ETFs

Given the investment horizon of 90 days PGIM Large Cap Buffer is expected to under-perform the Innovator ETFs. But the etf apears to be less risky and, when comparing its historical volatility, PGIM Large Cap Buffer is 1.15 times less risky than Innovator ETFs. The etf trades about -0.06 of its potential returns per unit of risk. The Innovator ETFs Trust is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,866  in Innovator ETFs Trust on December 29, 2024 and sell it today you would earn a total of  164.00  from holding Innovator ETFs Trust or generate 5.72% return on investment over 90 days.

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

PGIM Large Cap Buffer  vs.  Innovator ETFs Trust

PGIM Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGIM Large Cap Buffer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PGIM Large is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Innovator ETFs Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Innovator ETFs is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with PGIM Large and Innovator ETFs

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

The idea behind PGIM Large Cap Buffer and Innovator ETFs 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..