Correlation Between Capital World and Prudential Global
Can any of the company-specific risk be diversified away by investing in both Capital World and Prudential Global 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 Capital World and Prudential Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Bond and Prudential Global Total, you can compare the effects of market volatilities on Capital World and Prudential Global 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 Capital World with a short position of Prudential Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Prudential Global.
Diversification Opportunities for Capital World and Prudential Global
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Prudential is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Prudential Global Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Global Total and Capital World 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 Capital World Bond are associated (or correlated) with Prudential Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Global Total has no effect on the direction of Capital World i.e., Capital World and Prudential Global go up and down completely randomly.
Pair Corralation between Capital World and Prudential Global
Assuming the 90 days horizon Capital World Bond is expected to under-perform the Prudential Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital World Bond is 1.03 times less risky than Prudential Global. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Prudential Global Total is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 535.00 in Prudential Global Total on August 29, 2024 and sell it today you would lose (14.00) from holding Prudential Global Total or give up 2.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Capital World Bond vs. Prudential Global Total
Performance |
| Timeline |
| Capital World Bond |
| Prudential Global Total |
Capital World and Prudential Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Prudential Global
The main advantage of trading using opposite Capital World and Prudential Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Prudential Global 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 Global will offset losses from the drop in Prudential Global's long position.| Capital World vs. Capital World Bond | Capital World vs. Capital World Bond | Capital World vs. HUMANA INC | Capital World vs. Aquagold International |
| Prudential Global vs. Nebraska Municipal Fund | Prudential Global vs. Barings Active Short | Prudential Global vs. Ambrus Core Bond | Prudential Global vs. Astor Longshort Fund |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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