Correlation Between Absolute Convertible and Prudential Government
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Prudential Government 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 Absolute Convertible and Prudential Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Prudential Government Money, you can compare the effects of market volatilities on Absolute Convertible and Prudential Government 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 Absolute Convertible with a short position of Prudential Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Prudential Government.
Diversification Opportunities for Absolute Convertible and Prudential Government
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Absolute and Prudential is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Prudential Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Government and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Prudential Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Government has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Prudential Government go up and down completely randomly.
Pair Corralation between Absolute Convertible and Prudential Government
Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to generate 0.66 times more return on investment than Prudential Government. However, Absolute Convertible Arbitrage is 1.53 times less risky than Prudential Government. It trades about 0.26 of its potential returns per unit of risk. Prudential Government Money is currently generating about 0.1 per unit of risk. If you would invest 1,059 in Absolute Convertible Arbitrage on September 23, 2024 and sell it today you would earn a total of 77.00 from holding Absolute Convertible Arbitrage or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.9% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Prudential Government Money
Performance |
| Timeline |
| Absolute Convertible |
| Prudential Government |
Absolute Convertible and Prudential Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Prudential Government
The main advantage of trading using opposite Absolute Convertible and Prudential Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Prudential Government 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 Government will offset losses from the drop in Prudential Government's long position.| Absolute Convertible vs. Absolute Capital Opportunities | Absolute Convertible vs. Blackrock Lifepath Dynamic | Absolute Convertible vs. Dodge Stock Fund | Absolute Convertible vs. American Funds 2040 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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