Correlation Between Baron Health and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Baron Health and Prudential Financial 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 Baron Health and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baron Health Care and Prudential Financial Services, you can compare the effects of market volatilities on Baron Health and Prudential Financial 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 Baron Health with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Prudential Financial.
Diversification Opportunities for Baron Health and Prudential Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baron and Prudential is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Prudential Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Baron 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 Baron Health Care are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Baron Health i.e., Baron Health and Prudential Financial go up and down completely randomly.
Pair Corralation between Baron Health and Prudential Financial
Assuming the 90 days horizon Baron Health Care is expected to under-perform the Prudential Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Baron Health Care is 1.35 times less risky than Prudential Financial. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Prudential Financial Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,147 in Prudential Financial Services on November 28, 2024 and sell it today you would earn a total of 333.00 from holding Prudential Financial Services or generate 15.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baron Health Care vs. Prudential Financial Services
Performance |
| Timeline |
| Baron Health Care |
| Prudential Financial |
Baron Health and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baron Health and Prudential Financial
The main advantage of trading using opposite Baron Health and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baron Health position performs unexpectedly, Prudential Financial 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 Financial will offset losses from the drop in Prudential Financial's long position.| Baron Health vs. Fidelity Real Estate | Baron Health vs. Voya Real Estate | Baron Health vs. Forum Real Estate | Baron Health vs. Rreef Property Trust |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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