Correlation Between PGIM Active and Innovator

Can any of the company-specific risk be diversified away by investing in both PGIM Active and Innovator 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 Innovator 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 Innovator SP 500, you can compare the effects of market volatilities on PGIM Active and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Active and Innovator.

Diversification Opportunities for PGIM Active and Innovator

0.75

Correlation Coefficient

PGIM Active  Innovator

Poor diversification

The 3 months correlation between PGIM and Innovator is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of PGIM Active i.e., PGIM Active and Innovator go up and down completely randomly.

Pair Corralation between PGIM Active and Innovator

Given the investment horizon of 90 days PGIM Active High is expected to under-perform the Innovator. But the etf apears to be less risky and, when comparing its historical volatility, PGIM Active High is 1.32 times less risky than Innovator. The etf trades about -0.08 of its potential returns per unit of risk. The Innovator SP 500 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,021  in Innovator SP 500 on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Innovator SP 500 or generate 0.07% return on investment over 90 days.

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

PGIM Active High  vs.  Innovator SP 500

PGIM Active High

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 3 (%) 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.

Innovator SP 500

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PGIM Active and Innovator

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

The idea behind PGIM Active High and Innovator SP 500 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.