Correlation Between PGIM Ultra and IShares Financial
Can any of the company-specific risk be diversified away by investing in both PGIM Ultra and IShares Financial 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 Ultra and IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGIM Ultra Short and iShares Financial Services, you can compare the effects of market volatilities on PGIM Ultra and IShares Financial 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 Ultra with a short position of IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Ultra and IShares Financial.
Diversification Opportunities for PGIM Ultra and IShares Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PGIM and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Ultra Short and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial and PGIM Ultra 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 Ultra Short are associated (or correlated) with IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of PGIM Ultra i.e., PGIM Ultra and IShares Financial go up and down completely randomly.
Pair Corralation between PGIM Ultra and IShares Financial
Given the investment horizon of 90 days PGIM Ultra is expected to generate 17.98 times less return on investment than IShares Financial. But when comparing it to its historical volatility, PGIM Ultra Short is 42.56 times less risky than IShares Financial. It trades about 0.58 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 7,047 in iShares Financial Services on August 27, 2024 and sell it today you would earn a total of 1,099 from holding iShares Financial Services or generate 15.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGIM Ultra Short vs. iShares Financial Services
Performance |
| Timeline |
| PGIM Ultra Short |
| iShares Financial |
PGIM Ultra and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGIM Ultra and IShares Financial
The main advantage of trading using opposite PGIM Ultra and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Ultra position performs unexpectedly, IShares Financial 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 IShares Financial will offset losses from the drop in IShares Financial's long position.| PGIM Ultra vs. Janus Henderson Short | PGIM Ultra vs. iShares Ultra Short Term | PGIM Ultra vs. SPDR Bloomberg Investment | PGIM Ultra vs. Invesco Ultra Short |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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