Correlation Between PGIM Active and Xtrackers Short

Can any of the company-specific risk be diversified away by investing in both PGIM Active and Xtrackers Short 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 Xtrackers Short 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 Xtrackers Short Duration, you can compare the effects of market volatilities on PGIM Active and Xtrackers Short 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 Xtrackers Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Active and Xtrackers Short.

Diversification Opportunities for PGIM Active and Xtrackers Short

0.95

Correlation Coefficient

PGIM Active  Xtrackers Short

Almost no diversification

The 3 months correlation between PGIM and Xtrackers is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Active High and Xtrackers Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Short Duration 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 Xtrackers Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Short Duration has no effect on the direction of PGIM Active i.e., PGIM Active and Xtrackers Short go up and down completely randomly.

Pair Corralation between PGIM Active and Xtrackers Short

Given the investment horizon of 90 days PGIM Active is expected to generate 1.1 times less return on investment than Xtrackers Short. In addition to that, PGIM Active is 1.21 times more volatile than Xtrackers Short Duration. It trades about 0.21 of its total potential returns per unit of risk. Xtrackers Short Duration is currently generating about 0.28 per unit of volatility. If you would invest  4,411  in Xtrackers Short Duration on September 2, 2024 and sell it today you would earn a total of  136.00  from holding Xtrackers Short Duration or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

PGIM Active High  vs.  Xtrackers Short Duration

PGIM Active High

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PGIM Active is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Xtrackers Short Duration

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Short Duration are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Xtrackers Short is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PGIM Active and Xtrackers Short

The main advantage of trading using opposite PGIM Active and Xtrackers Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGIM Active position performs unexpectedly, Xtrackers Short 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 Xtrackers Short will offset losses from the drop in Xtrackers Short's long position.

The idea behind PGIM Active High and Xtrackers Short Duration 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.