Correlation Between PGIM Ultra and KraneShares MSCI

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

By analyzing existing cross correlation between PGIM Ultra Short and KraneShares MSCI China, you can compare the effects of market volatilities on PGIM Ultra and KraneShares MSCI 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 Ultra with a short position of KraneShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Ultra and KraneShares MSCI.

Diversification Opportunities for PGIM Ultra and KraneShares MSCI

-0.05

Correlation Coefficient

PGIM Ultra  KraneShares MSCI

Good diversification

The 3 months correlation between PGIM and KraneShares is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Ultra Short and KraneShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI China and PGIM Ultra 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 Ultra Short are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI China has no effect on the direction of PGIM Ultra i.e., PGIM Ultra and KraneShares MSCI go up and down completely randomly.

Pair Corralation between PGIM Ultra and KraneShares MSCI

Given the investment horizon of 90 days PGIM Ultra Short is expected to generate 0.01 times more return on investment than KraneShares MSCI. However, PGIM Ultra Short is 93.65 times less risky than KraneShares MSCI. It trades about 0.76 of its potential returns per unit of risk. KraneShares MSCI China is currently generating about -0.01 per unit of risk. If you would invest  4,949  in PGIM Ultra Short on September 21, 2024 and sell it today you would earn a total of  20.00  from holding PGIM Ultra Short or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PGIM Ultra Short  vs.  KraneShares MSCI China

PGIM Ultra Short

Risk-Adjusted Performance

49 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Ultra Short are ranked lower than 49 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, PGIM Ultra is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

KraneShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, KraneShares MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PGIM Ultra and KraneShares MSCI

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

The idea behind PGIM Ultra Short and KraneShares MSCI China 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.