Correlation Between US Treasury and PGIM ETF
Can any of the company-specific risk be diversified away by investing in both US Treasury 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 US Treasury and PGIM ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and PGIM ETF Trust, you can compare the effects of market volatilities on US Treasury 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 US Treasury with a short position of PGIM ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and PGIM ETF.
Diversification Opportunities for US Treasury and PGIM ETF
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between OBIL and PGIM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 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 US Treasury 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 US Treasury 12 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 US Treasury i.e., US Treasury and PGIM ETF go up and down completely randomly.
Pair Corralation between US Treasury and PGIM ETF
Given the investment horizon of 90 days US Treasury is expected to generate 12.94 times less return on investment than PGIM ETF. But when comparing it to its historical volatility, US Treasury 12 is 161.31 times less risky than PGIM ETF. It trades about 0.42 of its potential returns per unit of risk. PGIM ETF Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,878 in PGIM ETF Trust on September 1, 2024 and sell it today you would earn a total of 259.00 from holding PGIM ETF Trust or generate 5.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
US Treasury 12 vs. PGIM ETF Trust
Performance |
| Timeline |
| US Treasury 12 |
| PGIM ETF Trust |
US Treasury and PGIM ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and PGIM ETF
The main advantage of trading using opposite US Treasury and PGIM ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury 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.| US Treasury vs. SPDR Barclays Long | US Treasury vs. SPDR Portfolio Intermediate | US Treasury vs. SPDR Barclays Short | US Treasury vs. SPDR Barclays Intermediate |
| PGIM ETF vs. VanEck Vectors Moodys | PGIM ETF vs. BondBloxx ETF Trust | PGIM ETF vs. Vanguard ESG Corporate | PGIM ETF vs. Vanguard Intermediate Term Corporate |
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 CEOs Directory module to screen CEOs from public companies around the world.
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