Correlation Between PGIM Active and Vanguard Core

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

Diversification Opportunities for PGIM Active and Vanguard Core

-0.1

Correlation Coefficient

PGIM Active  Vanguard Core

Good diversification

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

Pair Corralation between PGIM Active and Vanguard Core

Given the investment horizon of 90 days PGIM Active High is expected to generate 0.63 times more return on investment than Vanguard Core. However, PGIM Active High is 1.58 times less risky than Vanguard Core. It trades about 0.13 of its potential returns per unit of risk. Vanguard Core Bond is currently generating about -0.09 per unit of risk. If you would invest  3,475  in PGIM Active High on September 13, 2024 and sell it today you would earn a total of  57.00  from holding PGIM Active High or generate 1.64% return on investment over 90 days.

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

PGIM Active High  vs.  Vanguard Core Bond

PGIM Active High

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 10 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Core Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vanguard Core 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 Vanguard Core

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

The idea behind PGIM Active High and Vanguard Core 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.