Correlation Between Barings Active and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Barings Active 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 Barings Active and Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Active Short and Prudential Health Sciences, you can compare the effects of market volatilities on Barings Active 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 Barings Active with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and Prudential Health.
Diversification Opportunities for Barings Active and Prudential Health
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Barings and Prudential is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Barings Active 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 Barings Active Short 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 Barings Active i.e., Barings Active and Prudential Health go up and down completely randomly.
Pair Corralation between Barings Active and Prudential Health
Assuming the 90 days horizon Barings Active is expected to generate 13.17 times less return on investment than Prudential Health. But when comparing it to its historical volatility, Barings Active Short is 11.45 times less risky than Prudential Health. It trades about 0.12 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,182 in Prudential Health Sciences on November 5, 2024 and sell it today you would earn a total of 94.00 from holding Prudential Health Sciences or generate 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Barings Active Short vs. Prudential Health Sciences
Performance |
| Timeline |
| Barings Active Short |
| Prudential Health |
Barings Active and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Active and Prudential Health
The main advantage of trading using opposite Barings Active and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Active 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.| Barings Active vs. Payden High Income | Barings Active vs. Jpmorgan High Yield | Barings Active vs. Gmo High Yield | Barings Active vs. Guggenheim High Yield |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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