Correlation Between Pgim Conservative and International Developed

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

By analyzing existing cross correlation between Pgim Conservative Retirement and International Developed Markets, you can compare the effects of market volatilities on Pgim Conservative and International Developed 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 Conservative with a short position of International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pgim Conservative and International Developed.

Diversification Opportunities for Pgim Conservative and International Developed

0.8

Correlation Coefficient

Pgim Conservative  International Developed

Very poor diversification

The 3 months correlation between Pgim and International is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pgim Conservative Retirement and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed and Pgim Conservative 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 Conservative Retirement are associated (or correlated) with International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Pgim Conservative i.e., Pgim Conservative and International Developed go up and down completely randomly.

Pair Corralation between Pgim Conservative and International Developed

Assuming the 90 days horizon Pgim Conservative Retirement is expected to under-perform the International Developed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pgim Conservative Retirement is 1.92 times less risky than International Developed. The mutual fund trades about -0.02 of its potential returns per unit of risk. The International Developed Markets is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,258  in International Developed Markets on December 1, 2024 and sell it today you would earn a total of  136.00  from holding International Developed Markets or generate 3.19% return on investment over 90 days.

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

Pgim Conservative Retirement  vs.  International Developed Market

Pgim Conservative

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pgim Conservative Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pgim Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Developed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Developed Markets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, International Developed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pgim Conservative and International Developed

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

The idea behind Pgim Conservative Retirement and International Developed Markets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.