Correlation Between AES and Prudential Utility
Can any of the company-specific risk be diversified away by investing in both AES and Prudential Utility 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 AES and Prudential Utility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Prudential Utility Fund, you can compare the effects of market volatilities on AES and Prudential Utility 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 AES with a short position of Prudential Utility. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Prudential Utility.
Diversification Opportunities for AES and Prudential Utility
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AES and Prudential is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Prudential Utility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Utility and AES 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 The AES are associated (or correlated) with Prudential Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Utility has no effect on the direction of AES i.e., AES and Prudential Utility go up and down completely randomly.
Pair Corralation between AES and Prudential Utility
Considering the 90-day investment horizon The AES is expected to under-perform the Prudential Utility. In addition to that, AES is 3.28 times more volatile than Prudential Utility Fund. It trades about -0.28 of its total potential returns per unit of risk. Prudential Utility Fund is currently generating about 0.25 per unit of volatility. If you would invest 1,659 in Prudential Utility Fund on September 1, 2024 and sell it today you would earn a total of 99.00 from holding Prudential Utility Fund or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The AES vs. Prudential Utility Fund
Performance |
| Timeline |
| AES |
| Prudential Utility |
AES and Prudential Utility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Prudential Utility
The main advantage of trading using opposite AES and Prudential Utility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Prudential Utility 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 Utility will offset losses from the drop in Prudential Utility's long position.The idea behind The AES and Prudential Utility Fund 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.| Prudential Utility vs. Prudential Jennison Blend | Prudential Utility vs. Jennison Natural Resources | Prudential Utility vs. Prudential Jennison Growth | Prudential Utility vs. Prudential Jennison Small |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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