Correlation Between Prudential High and Vanguard Small-cap

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

By analyzing existing cross correlation between Prudential High Yield and Vanguard Small Cap Value, you can compare the effects of market volatilities on Prudential High and Vanguard Small-cap 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 Prudential High with a short position of Vanguard Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Vanguard Small-cap.

Diversification Opportunities for Prudential High and Vanguard Small-cap

0.39

Correlation Coefficient

Prudential High  Vanguard Small-cap

Weak diversification

The 3 months correlation between Prudential and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Prudential High 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 Prudential High Yield are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Prudential High i.e., Prudential High and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Prudential High and Vanguard Small-cap

Assuming the 90 days horizon Prudential High Yield is expected to under-perform the Vanguard Small-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential High Yield is 5.19 times less risky than Vanguard Small-cap. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Vanguard Small Cap Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,016  in Vanguard Small Cap Value on September 13, 2025 and sell it today you would earn a total of  221.00  from holding Vanguard Small Cap Value or generate 4.41% return on investment over 90 days.

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

Prudential High Yield  vs.  Vanguard Small Cap Value

Prudential High Yield

Risk-Adjusted Performance

Weakest

Over the last 90 days Prudential High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential High and Vanguard Small-cap

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

The idea behind Prudential High Yield and Vanguard Small Cap Value 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.