Correlation Between Prudential Government and Pgim Securitized
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Pgim Securitized 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 Prudential Government and Pgim Securitized into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Government Income and Pgim Securitized Credit, you can compare the effects of market volatilities on Prudential Government and Pgim Securitized 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 Prudential Government with a short position of Pgim Securitized. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Pgim Securitized.
Diversification Opportunities for Prudential Government and Pgim Securitized
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Pgim is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Pgim Securitized Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Securitized Credit and Prudential Government 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 Prudential Government Income are associated (or correlated) with Pgim Securitized. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Securitized Credit has no effect on the direction of Prudential Government i.e., Prudential Government and Pgim Securitized go up and down completely randomly.
Pair Corralation between Prudential Government and Pgim Securitized
Assuming the 90 days horizon Prudential Government is expected to generate 3.54 times less return on investment than Pgim Securitized. In addition to that, Prudential Government is 3.2 times more volatile than Pgim Securitized Credit. It trades about 0.02 of its total potential returns per unit of risk. Pgim Securitized Credit is currently generating about 0.25 per unit of volatility. If you would invest 840.00 in Pgim Securitized Credit on August 27, 2024 and sell it today you would earn a total of 134.00 from holding Pgim Securitized Credit or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Government Income vs. Pgim Securitized Credit
Performance |
| Timeline |
| Prudential Government |
| Pgim Securitized Credit |
Prudential Government and Pgim Securitized Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Pgim Securitized
The main advantage of trading using opposite Prudential Government and Pgim Securitized positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Pgim Securitized 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 Securitized will offset losses from the drop in Pgim Securitized's long position.The idea behind Prudential Government Income and Pgim Securitized Credit 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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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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