Correlation Between PGIM Active and Schwab Aggregate

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

Diversification Opportunities for PGIM Active and Schwab Aggregate

0.82

Correlation Coefficient

PGIM Active  Schwab Aggregate

Very poor diversification

The 3 months correlation between PGIM and Schwab is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and Schwab Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Aggregate Bond 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 Schwab Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Aggregate Bond has no effect on the direction of PGIM Active i.e., PGIM Active and Schwab Aggregate go up and down completely randomly.

Pair Corralation between PGIM Active and Schwab Aggregate

Given the investment horizon of 90 days PGIM Active is expected to generate 1.66 times less return on investment than Schwab Aggregate. But when comparing it to its historical volatility, PGIM Active High is 1.34 times less risky than Schwab Aggregate. It trades about 0.12 of its potential returns per unit of risk. Schwab Aggregate Bond is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,247  in Schwab Aggregate Bond on December 27, 2024 and sell it today you would earn a total of  60.00  from holding Schwab Aggregate Bond or generate 2.67% 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.  Schwab Aggregate Bond

PGIM Active High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 9 (%) 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.

Schwab Aggregate Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Aggregate Bond are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Schwab Aggregate 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 Active and Schwab Aggregate

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

The idea behind PGIM Active High and Schwab Aggregate Bond 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.