Correlation Between PGIM Ultra and Virtus LifeSci

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

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

Diversification Opportunities for PGIM Ultra and Virtus LifeSci

-0.79

Correlation Coefficient

PGIM Ultra  Virtus LifeSci

Pay attention - limited upside

The 3 months correlation between PGIM and Virtus is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Ultra Short and Virtus LifeSci Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus LifeSci Biotech and PGIM Ultra 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 PGIM Ultra Short are associated (or correlated) with Virtus LifeSci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus LifeSci Biotech has no effect on the direction of PGIM Ultra i.e., PGIM Ultra and Virtus LifeSci go up and down completely randomly.

Pair Corralation between PGIM Ultra and Virtus LifeSci

Given the investment horizon of 90 days PGIM Ultra Short is expected to generate 0.03 times more return on investment than Virtus LifeSci. However, PGIM Ultra Short is 30.91 times less risky than Virtus LifeSci. It trades about 0.47 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.29 per unit of risk. If you would invest  4,947  in PGIM Ultra Short on January 30, 2024 and sell it today you would earn a total of  20.00  from holding PGIM Ultra Short or generate 0.4% return on investment over 90 days.

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

PGIM Ultra Short  vs.  Virtus LifeSci Biotech

PGIM Ultra Short

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Ultra Short are ranked lower than 19 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Virtus LifeSci Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with PGIM Ultra and Virtus LifeSci

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

The idea behind PGIM Ultra Short and Virtus LifeSci Biotech 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.