Correlation Between PGIM Active and Innovator
Can any of the company-specific risk be diversified away by investing in both PGIM Active and Innovator 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 Innovator 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 Innovator SP 500, you can compare the effects of market volatilities on PGIM Active and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Active and Innovator.
Diversification Opportunities for PGIM Active and Innovator
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PGIM and Innovator is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of PGIM Active i.e., PGIM Active and Innovator go up and down completely randomly.
Pair Corralation between PGIM Active and Innovator
Given the investment horizon of 90 days PGIM Active is expected to generate 1.74 times less return on investment than Innovator. But when comparing it to its historical volatility, PGIM Active High is 1.45 times less risky than Innovator. It trades about 0.17 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,944 in Innovator SP 500 on August 26, 2024 and sell it today you would earn a total of 55.00 from holding Innovator SP 500 or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Active High vs. Innovator SP 500
Performance |
| Timeline |
| PGIM Active High |
| Innovator SP 500 |
PGIM Active and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Active and Innovator
The main advantage of trading using opposite PGIM Active and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Active position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.| PGIM Active vs. First Trust Senior | PGIM Active vs. First Trust Low | PGIM Active vs. First Trust Enhanced | PGIM Active vs. First Trust TCW |
| Innovator vs. First Trust Cboe | Innovator vs. FT Cboe Vest | Innovator vs. Innovator SP 500 | Innovator vs. FT Cboe Vest |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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