Correlation Between IShares Short and PGIM Ultra

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

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

Diversification Opportunities for IShares Short and PGIM Ultra

0.97

Correlation Coefficient

IShares Short  PGIM Ultra

Almost no diversification

The 3 months correlation between IShares and PGIM is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Treasury 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 IShares 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 iShares Short Treasury 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 IShares Short i.e., IShares Short and PGIM Ultra go up and down completely randomly.

Pair Corralation between IShares Short and PGIM Ultra

Considering the 90-day investment horizon IShares Short is expected to generate 1.39 times less return on investment than PGIM Ultra. But when comparing it to its historical volatility, iShares Short Treasury is 2.81 times less risky than PGIM Ultra. It trades about 1.14 of its potential returns per unit of risk. PGIM Ultra Short is currently generating about 0.57 of returns per unit of risk over similar time horizon. If you would invest  4,929  in PGIM Ultra Short on February 5, 2024 and sell it today you would earn a total of  25.00  from holding PGIM Ultra Short or generate 0.51% return on investment over 90 days.

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

iShares Short Treasury  vs.  PGIM Ultra Short

iShares Short Treasury

Risk-Adjusted Performance

88 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Treasury are ranked lower than 88 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, IShares Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PGIM Ultra Short

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Ultra Short are ranked lower than 11 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Short and PGIM Ultra

The main advantage of trading using opposite IShares Short and PGIM Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 iShares Short Treasury 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.