Correlation Between Vanguard Target and Prudential Short

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

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

Diversification Opportunities for Vanguard Target and Prudential Short

0.67

Correlation Coefficient

Vanguard Target  Prudential Short

Poor diversification

The 3 months correlation between VANGUARD and Prudential is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Prudential Short Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Term and Vanguard Target 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 Target Retirement are associated (or correlated) with Prudential Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Term has no effect on the direction of Vanguard Target i.e., Vanguard Target and Prudential Short go up and down completely randomly.

Pair Corralation between Vanguard Target and Prudential Short

Assuming the 90 days horizon Vanguard Target Retirement is expected to generate 3.19 times more return on investment than Prudential Short. However, Vanguard Target is 3.19 times more volatile than Prudential Short Term Porate. It trades about 0.27 of its potential returns per unit of risk. Prudential Short Term Porate is currently generating about 0.23 per unit of risk. If you would invest  4,488  in Vanguard Target Retirement on May 21, 2025 and sell it today you would earn a total of  358.00  from holding Vanguard Target Retirement or generate 7.98% return on investment over 90 days.

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

Vanguard Target Retirement  vs.  Prudential Short Term Porate

Vanguard Target Reti

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Target may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Prudential Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Short Term Porate are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Prudential Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Target and Prudential Short

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

The idea behind Vanguard Target Retirement and Prudential Short Term Porate 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.