Correlation Between Innovator and PGIM Laddered

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

By analyzing existing cross correlation between Innovator SP 500 and PGIM Laddered, you can compare the effects of market volatilities on Innovator and PGIM Laddered 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 Innovator with a short position of PGIM Laddered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and PGIM Laddered.

Diversification Opportunities for Innovator and PGIM Laddered

0.99

Correlation Coefficient

Innovator  PGIM Laddered

No risk reduction

The 3 months correlation between Innovator and PGIM is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and PGIM Laddered in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Laddered and Innovator 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 Innovator SP 500 are associated (or correlated) with PGIM Laddered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Laddered has no effect on the direction of Innovator i.e., Innovator and PGIM Laddered go up and down completely randomly.

Pair Corralation between Innovator and PGIM Laddered

Given the investment horizon of 90 days Innovator is expected to generate 1.59 times less return on investment than PGIM Laddered. But when comparing it to its historical volatility, Innovator SP 500 is 1.91 times less risky than PGIM Laddered. It trades about 0.29 of its potential returns per unit of risk. PGIM Laddered is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,559  in PGIM Laddered on September 2, 2024 and sell it today you would earn a total of  132.00  from holding PGIM Laddered or generate 5.16% return on investment over 90 days.

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

Innovator SP 500  vs.  PGIM Laddered

Innovator SP 500

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Innovator is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

PGIM Laddered

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Laddered are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, PGIM Laddered 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 Innovator and PGIM Laddered

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

The idea behind Innovator SP 500 and PGIM Laddered 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.