Correlation Between PGIM Active and SHP ETF

Can any of the company-specific risk be diversified away by investing in both PGIM Active and SHP ETF 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 SHP ETF 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 SHP ETF Trust, you can compare the effects of market volatilities on PGIM Active and SHP ETF 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 SHP ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Active and SHP ETF.

Diversification Opportunities for PGIM Active and SHP ETF

0.86

Correlation Coefficient

PGIM Active  SHP ETF

Very poor diversification

The 3 months correlation between PGIM and SHP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of PGIM Active i.e., PGIM Active and SHP ETF go up and down completely randomly.

Pair Corralation between PGIM Active and SHP ETF

Given the investment horizon of 90 days PGIM Active is expected to generate 1.1 times less return on investment than SHP ETF. But when comparing it to its historical volatility, PGIM Active High is 1.4 times less risky than SHP ETF. It trades about 0.15 of its potential returns per unit of risk. SHP ETF Trust is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,617  in SHP ETF Trust on December 26, 2024 and sell it today you would earn a total of  97.00  from holding SHP ETF Trust or generate 2.1% return on investment over 90 days.

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

PGIM Active High  vs.  SHP ETF Trust

PGIM Active High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 11 (%) 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.

SHP ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SHP ETF Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, SHP ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PGIM Active and SHP ETF

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

The idea behind PGIM Active High and SHP ETF 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.