Correlation Between GM and Prudential Floating
Can any of the company-specific risk be diversified away by investing in both GM and Prudential Floating 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 GM and Prudential Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Prudential Floating Rate, you can compare the effects of market volatilities on GM and Prudential Floating 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 GM with a short position of Prudential Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Prudential Floating.
Diversification Opportunities for GM and Prudential Floating
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Prudential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Prudential Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Floating Rate and GM 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 General Motors are associated (or correlated) with Prudential Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Floating Rate has no effect on the direction of GM i.e., GM and Prudential Floating go up and down completely randomly.
Pair Corralation between GM and Prudential Floating
Allowing for the 90-day total investment horizon General Motors is expected to generate 10.31 times more return on investment than Prudential Floating. However, GM is 10.31 times more volatile than Prudential Floating Rate. It trades about 0.05 of its potential returns per unit of risk. Prudential Floating Rate is currently generating about 0.21 per unit of risk. If you would invest 3,778 in General Motors on September 1, 2024 and sell it today you would earn a total of 1,781 from holding General Motors or generate 47.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Prudential Floating Rate
Performance |
| Timeline |
| General Motors |
| Prudential Floating Rate |
GM and Prudential Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Prudential Floating
The main advantage of trading using opposite GM and Prudential Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Prudential Floating 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 Floating will offset losses from the drop in Prudential Floating's long position.The idea behind General Motors and Prudential Floating Rate 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.| Prudential Floating vs. Prudential High Yield | Prudential Floating vs. Prudential Short Duration | Prudential Floating vs. Prudential Total Return | Prudential Floating vs. Prudential Short Term Porate |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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