Correlation Between Vanguard Short and PGIM Short

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

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

Diversification Opportunities for Vanguard Short and PGIM Short

0.69

Correlation Coefficient

Vanguard Short  PGIM Short

Poor diversification

The 3 months correlation between Vanguard and PGIM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Bond and PGIM Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Short Duration and Vanguard 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 Vanguard Short Term Bond are associated (or correlated) with PGIM Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Short Duration has no effect on the direction of Vanguard Short i.e., Vanguard Short and PGIM Short go up and down completely randomly.

Pair Corralation between Vanguard Short and PGIM Short

Considering the 90-day investment horizon Vanguard Short Term Bond is expected to under-perform the PGIM Short. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Short Term Bond is 1.01 times less risky than PGIM Short. The etf trades about -0.04 of its potential returns per unit of risk. The PGIM Short Duration is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,060  in PGIM Short Duration on August 26, 2024 and sell it today you would earn a total of  27.00  from holding PGIM Short Duration or generate 0.53% return on investment over 90 days.

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

Vanguard Short Term Bond  vs.  PGIM Short Duration

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Short Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Short is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PGIM Short Duration

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Short Duration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, PGIM Short is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Short and PGIM Short

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

The idea behind Vanguard Short Term Bond and PGIM 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.