Correlation Between PGIM Short and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both PGIM Short and Vanguard Intermediate 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 Short and Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGIM Short Duration and Vanguard Intermediate Term Corporate, you can compare the effects of market volatilities on PGIM Short and Vanguard Intermediate 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 Short with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Short and Vanguard Intermediate.
Diversification Opportunities for PGIM Short and Vanguard Intermediate
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PGIM and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Short Duration and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and PGIM Short 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 Short Duration are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of PGIM Short i.e., PGIM Short and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between PGIM Short and Vanguard Intermediate
Given the investment horizon of 90 days PGIM Short is expected to generate 2.94 times less return on investment than Vanguard Intermediate. But when comparing it to its historical volatility, PGIM Short Duration is 2.4 times less risky than Vanguard Intermediate. It trades about 0.13 of its potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 8,114 in Vanguard Intermediate Term Corporate on September 3, 2024 and sell it today you would earn a total of 103.00 from holding Vanguard Intermediate Term Corporate or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Short Duration vs. Vanguard Intermediate Term Cor
Performance |
| Timeline |
| PGIM Short Duration |
| Vanguard Intermediate |
PGIM Short and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Short and Vanguard Intermediate
The main advantage of trading using opposite PGIM Short and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Short position performs unexpectedly, Vanguard Intermediate 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 Vanguard Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| PGIM Short vs. iShares 1 5 Year | PGIM Short vs. SPDR Barclays Short | PGIM Short vs. iShares Core 1 5 | PGIM Short vs. iShares 0 5 Year |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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