Correlation Between Alger Health and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Alger Health and Prudential Health 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 Alger Health and Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alger Health Sciences and Prudential Health Sciences, you can compare the effects of market volatilities on Alger Health and Prudential Health 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 Alger Health with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alger Health and Prudential Health.
Diversification Opportunities for Alger Health and Prudential Health
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alger and Prudential is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alger Health Sciences and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Alger Health 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 Alger Health Sciences are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Alger Health i.e., Alger Health and Prudential Health go up and down completely randomly.
Pair Corralation between Alger Health and Prudential Health
Assuming the 90 days horizon Alger Health is expected to generate 3.2 times less return on investment than Prudential Health. But when comparing it to its historical volatility, Alger Health Sciences is 1.06 times less risky than Prudential Health. It trades about 0.01 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,393 in Prudential Health Sciences on August 27, 2024 and sell it today you would earn a total of 630.00 from holding Prudential Health Sciences or generate 18.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alger Health Sciences vs. Prudential Health Sciences
Performance |
| Timeline |
| Alger Health Sciences |
| Prudential Health |
Alger Health and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alger Health and Prudential Health
The main advantage of trading using opposite Alger Health and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alger Health position performs unexpectedly, Prudential Health 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 Health will offset losses from the drop in Prudential Health's long position.| Alger Health vs. Harbor Vertible Securities | Alger Health vs. Franklin Vertible Securities | Alger Health vs. Absolute Convertible Arbitrage | Alger Health vs. Teton Vertible Securities |
| Prudential Health vs. Dws Government Money | Prudential Health vs. Vanguard Short Term Government | Prudential Health vs. Aig Government Money | Prudential Health vs. Short Term Government Fund |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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