Correlation Between Federated High and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Federated High and Prudential Financial 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 Federated High and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated High Yield and Prudential Financial Services, you can compare the effects of market volatilities on Federated High and Prudential Financial 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 Federated High with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Prudential Financial.
Diversification Opportunities for Federated High and Prudential Financial
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Federated and Prudential is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Prudential Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Federated High 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 Federated High Yield are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Federated High i.e., Federated High and Prudential Financial go up and down completely randomly.
Pair Corralation between Federated High and Prudential Financial
Assuming the 90 days horizon Federated High is expected to generate 8.7 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, Federated High Yield is 4.94 times less risky than Prudential Financial. It trades about 0.18 of its potential returns per unit of risk. Prudential Financial Services is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,281 in Prudential Financial Services on November 3, 2024 and sell it today you would earn a total of 159.00 from holding Prudential Financial Services or generate 6.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated High Yield vs. Prudential Financial Services
Performance |
| Timeline |
| Federated High Yield |
| Prudential Financial |
Federated High and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Prudential Financial
The main advantage of trading using opposite Federated High and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Prudential Financial 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 Financial will offset losses from the drop in Prudential Financial's long position.| Federated High vs. Janus High Yield Fund | Federated High vs. Northeast Investors Trust | Federated High vs. High Yield Fund Investor | Federated High vs. Ab Sustainable Thematic |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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