Correlation Between American Funds and Prudential Day
Can any of the company-specific risk be diversified away by investing in both American Funds and Prudential Day 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 Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2045 and Prudential Day One, you can compare the effects of market volatilities on American Funds and Prudential Day 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 Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Prudential Day.
Diversification Opportunities for American Funds and Prudential Day
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2045 and Prudential Day One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Day One 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 2045 are associated (or correlated) with Prudential Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Day One has no effect on the direction of American Funds i.e., American Funds and Prudential Day go up and down completely randomly.
Pair Corralation between American Funds and Prudential Day
Assuming the 90 days horizon American Funds 2045 is expected to generate 1.13 times more return on investment than Prudential Day. However, American Funds is 1.13 times more volatile than Prudential Day One. It trades about 0.14 of its potential returns per unit of risk. Prudential Day One is currently generating about 0.14 per unit of risk. If you would invest 2,096 in American Funds 2045 on September 3, 2024 and sell it today you would earn a total of 111.00 from holding American Funds 2045 or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2045 vs. Prudential Day One
Performance |
| Timeline |
| American Funds 2045 |
| Prudential Day One |
American Funds and Prudential Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Prudential Day
The main advantage of trading using opposite American Funds and Prudential Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Prudential Day 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 Day will offset losses from the drop in Prudential Day's long position.| American Funds vs. Baird Smallmid Cap | American Funds vs. Champlain Small | American Funds vs. Rbc Small Cap | American Funds vs. The Hartford Small |
| Prudential Day vs. Msift High Yield | Prudential Day vs. Pgim High Yield | Prudential Day vs. Calvert High Yield | Prudential Day vs. Prudential High Yield |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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