Correlation Between PGIM Active and WisdomTree Yield

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

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

Diversification Opportunities for PGIM Active and WisdomTree Yield

0.1

Correlation Coefficient

PGIM Active  WisdomTree Yield

Average diversification

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

Pair Corralation between PGIM Active and WisdomTree Yield

Given the investment horizon of 90 days PGIM Active High is expected to generate 0.58 times more return on investment than WisdomTree Yield. However, PGIM Active High is 1.73 times less risky than WisdomTree Yield. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Yield Enhanced is currently generating about -0.13 per unit of risk. If you would invest  3,486  in PGIM Active High on September 17, 2024 and sell it today you would earn a total of  30.00  from holding PGIM Active High or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

PGIM Active High  vs.  WisdomTree Yield Enhanced

PGIM Active High

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PGIM Active is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

WisdomTree Yield Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Yield Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, WisdomTree Yield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PGIM Active and WisdomTree Yield

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

The idea behind PGIM Active High and WisdomTree Yield Enhanced 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.