Correlation Between American Funds and Prudential Short
Can any of the company-specific risk be diversified away by investing in both American Funds and Prudential Short 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 American Funds and Prudential Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Global and Prudential Short Duration, you can compare the effects of market volatilities on American Funds and Prudential Short 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 American Funds with a short position of Prudential Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Prudential Short.
Diversification Opportunities for American Funds and Prudential Short
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Prudential is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Global and Prudential Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Duration and American Funds 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 American Funds Global are associated (or correlated) with Prudential Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Duration has no effect on the direction of American Funds i.e., American Funds and Prudential Short go up and down completely randomly.
Pair Corralation between American Funds and Prudential Short
Assuming the 90 days horizon American Funds Global is expected to generate 3.63 times more return on investment than Prudential Short. However, American Funds is 3.63 times more volatile than Prudential Short Duration. It trades about 0.08 of its potential returns per unit of risk. Prudential Short Duration is currently generating about 0.16 per unit of risk. If you would invest 1,681 in American Funds Global on December 4, 2024 and sell it today you would earn a total of 574.00 from holding American Funds Global or generate 34.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Global vs. Prudential Short Duration
Performance |
| Timeline |
| American Funds Global |
| Prudential Short Duration |
American Funds and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Prudential Short
The main advantage of trading using opposite American Funds and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Prudential Short 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 Short will offset losses from the drop in Prudential Short's long position.| American Funds vs. Calvert Large Cap | American Funds vs. Lord Abbett Affiliated | American Funds vs. Guidemark Large Cap | American Funds vs. Fidelity Large Cap |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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