Correlation Between PGIM Active and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both PGIM Active and Overlay Shares 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 Active and Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGIM Active High and Overlay Shares Core, you can compare the effects of market volatilities on PGIM Active and Overlay Shares 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 Active with a short position of Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Active and Overlay Shares.
Diversification Opportunities for PGIM Active and Overlay Shares
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between PGIM and Overlay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and Overlay Shares Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Core and PGIM Active 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 Active High are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Core has no effect on the direction of PGIM Active i.e., PGIM Active and Overlay Shares go up and down completely randomly.
Pair Corralation between PGIM Active and Overlay Shares
Given the investment horizon of 90 days PGIM Active High is expected to generate about the same return on investment as Overlay Shares Core. But, PGIM Active High is 2.2 times less risky than Overlay Shares. It trades about 0.22 of its potential returns per unit of risk. Overlay Shares Core is currently generating about 0.1 per unit of risk. If you would invest 1,963 in Overlay Shares Core on September 3, 2024 and sell it today you would earn a total of 142.00 from holding Overlay Shares Core or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Active High vs. Overlay Shares Core
Performance |
| Timeline |
| PGIM Active High |
| Overlay Shares Core |
PGIM Active and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Active and Overlay Shares
The main advantage of trading using opposite PGIM Active and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Active position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| PGIM Active vs. Xtrackers High Beta | PGIM Active vs. Xtrackers Short Duration | PGIM Active vs. FlexShares High Yield | PGIM Active vs. Franklin Liberty High |
| Overlay Shares vs. ClearShares Ultra Short Maturity | Overlay Shares vs. PGIM Active High | Overlay Shares vs. Pacer Trendpilot Bond | Overlay Shares vs. Pacer Lunt Large |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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