Correlation Between PGIM Short and Blackrock Muniholdings

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

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

Diversification Opportunities for PGIM Short and Blackrock Muniholdings

0.32

Correlation Coefficient

PGIM Short  Blackrock Muniholdings

Weak diversification

The 3 months correlation between PGIM and Blackrock is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Short Duration and Blackrock Muniholdings Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings and PGIM Short 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 Short Duration are associated (or correlated) with Blackrock Muniholdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniholdings has no effect on the direction of PGIM Short i.e., PGIM Short and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between PGIM Short and Blackrock Muniholdings

Given the investment horizon of 90 days PGIM Short Duration is expected to generate 0.54 times more return on investment than Blackrock Muniholdings. However, PGIM Short Duration is 1.86 times less risky than Blackrock Muniholdings. It trades about -0.17 of its potential returns per unit of risk. Blackrock Muniholdings Quality is currently generating about -0.28 per unit of risk. If you would invest  1,649  in PGIM Short Duration on September 23, 2024 and sell it today you would lose (27.00) from holding PGIM Short Duration or give up 1.64% of portfolio value over 90 days.

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

PGIM Short Duration  vs.  Blackrock Muniholdings Quality

PGIM Short Duration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Short Duration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, PGIM Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Muniholdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniholdings Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, Blackrock Muniholdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PGIM Short and Blackrock Muniholdings

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

The idea behind PGIM Short Duration and Blackrock Muniholdings Quality 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.