Correlation Between PGIM Large and Dow Jones
Can any of the company-specific risk be diversified away by investing in both PGIM Large and Dow Jones 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 Large and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGIM Large Cap Buffer and Dow Jones Industrial, you can compare the effects of market volatilities on PGIM Large and Dow Jones 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 Large with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Large and Dow Jones.
Diversification Opportunities for PGIM Large and Dow Jones
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PGIM and Dow is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Large Cap Buffer and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and PGIM Large 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 Large Cap Buffer are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of PGIM Large i.e., PGIM Large and Dow Jones go up and down completely randomly.
Pair Corralation between PGIM Large and Dow Jones
Given the investment horizon of 90 days PGIM Large is expected to generate 4.01 times less return on investment than Dow Jones. But when comparing it to its historical volatility, PGIM Large Cap Buffer is 3.08 times less risky than Dow Jones. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Large Cap Buffer vs. Dow Jones Industrial
Performance |
| Timeline |
PGIM Large and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
PGIM Large Cap Buffer
Pair trading matchups for PGIM Large
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with PGIM Large and Dow Jones
The main advantage of trading using opposite PGIM Large and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Large position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| PGIM Large vs. FT Vest Equity | PGIM Large vs. Northern Lights | PGIM Large vs. Dimensional International High | PGIM Large vs. First Trust Exchange Traded |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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