Correlation Between Vanguard Mid and PGIM Ultra

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and PGIM Ultra 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 Vanguard Mid and PGIM Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Mid Cap Index and PGIM Ultra Short, you can compare the effects of market volatilities on Vanguard Mid and PGIM Ultra 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 Vanguard Mid with a short position of PGIM Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and PGIM Ultra.

Diversification Opportunities for Vanguard Mid and PGIM Ultra

0.94

Correlation Coefficient

Vanguard Mid  PGIM Ultra

Almost no diversification

The 3 months correlation between Vanguard and PGIM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and PGIM Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Ultra Short and Vanguard Mid 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 Vanguard Mid Cap Index are associated (or correlated) with PGIM Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Ultra Short has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and PGIM Ultra go up and down completely randomly.

Pair Corralation between Vanguard Mid and PGIM Ultra

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 21.56 times more return on investment than PGIM Ultra. However, Vanguard Mid is 21.56 times more volatile than PGIM Ultra Short. It trades about 0.22 of its potential returns per unit of risk. PGIM Ultra Short is currently generating about 0.64 per unit of risk. If you would invest  25,633  in Vanguard Mid Cap Index on August 30, 2024 and sell it today you would earn a total of  2,758  from holding Vanguard Mid Cap Index or generate 10.76% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  PGIM Ultra Short

Vanguard Mid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PGIM Ultra Short

Risk-Adjusted Performance

50 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Ultra Short are ranked lower than 50 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, PGIM Ultra is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Mid and PGIM Ultra

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

The idea behind Vanguard Mid Cap Index and PGIM Ultra Short 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.