Correlation Between Vanguard and PGIM ETF

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

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

Diversification Opportunities for Vanguard and PGIM ETF

0.39

Correlation Coefficient

Vanguard  PGIM ETF

Weak diversification

The 3 months correlation between Vanguard and PGIM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust and Vanguard 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 Vanguard SP 500 are associated (or correlated) with PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of Vanguard i.e., Vanguard and PGIM ETF go up and down completely randomly.

Pair Corralation between Vanguard and PGIM ETF

Considering the 90-day investment horizon Vanguard SP 500 is expected to under-perform the PGIM ETF. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard SP 500 is 1.32 times less risky than PGIM ETF. The etf trades about -0.08 of its potential returns per unit of risk. The PGIM ETF Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,247  in PGIM ETF Trust on December 28, 2024 and sell it today you would earn a total of  255.00  from holding PGIM ETF Trust or generate 4.86% return on investment over 90 days.

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

Vanguard SP 500  vs.  PGIM ETF Trust

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PGIM ETF Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, PGIM ETF is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard and PGIM ETF

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

The idea behind Vanguard SP 500 and PGIM ETF Trust 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.