Correlation Between Prudential Emerging and Quantitative Longshort
Can any of the company-specific risk be diversified away by investing in both Prudential Emerging and Quantitative Longshort 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 Prudential Emerging and Quantitative Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Emerging Markets and Quantitative Longshort Equity, you can compare the effects of market volatilities on Prudential Emerging and Quantitative Longshort 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 Prudential Emerging with a short position of Quantitative Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Emerging and Quantitative Longshort.
Diversification Opportunities for Prudential Emerging and Quantitative Longshort
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and Quantitative is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Emerging Markets and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort and Prudential Emerging 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 Prudential Emerging Markets are associated (or correlated) with Quantitative Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Prudential Emerging i.e., Prudential Emerging and Quantitative Longshort go up and down completely randomly.
Pair Corralation between Prudential Emerging and Quantitative Longshort
Assuming the 90 days horizon Prudential Emerging is expected to generate 2.18 times less return on investment than Quantitative Longshort. In addition to that, Prudential Emerging is 1.21 times more volatile than Quantitative Longshort Equity. It trades about 0.04 of its total potential returns per unit of risk. Quantitative Longshort Equity is currently generating about 0.1 per unit of volatility. If you would invest 1,242 in Quantitative Longshort Equity on September 1, 2024 and sell it today you would earn a total of 229.00 from holding Quantitative Longshort Equity or generate 18.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Prudential Emerging Markets vs. Quantitative Longshort Equity
Performance |
| Timeline |
| Prudential Emerging |
| Quantitative Longshort |
Prudential Emerging and Quantitative Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Emerging and Quantitative Longshort
The main advantage of trading using opposite Prudential Emerging and Quantitative Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Emerging position performs unexpectedly, Quantitative Longshort 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 Quantitative Longshort will offset losses from the drop in Quantitative Longshort's long position.The idea behind Prudential Emerging Markets and Quantitative Longshort Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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