Correlation Between GM and Prudential Short
Can any of the company-specific risk be diversified away by investing in both GM and Prudential Short 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 Short 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 Short Term Porate, you can compare the effects of market volatilities on GM and Prudential Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Prudential Short.
Diversification Opportunities for GM and Prudential Short
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GM and Prudential is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Prudential Short Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Term 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Term has no effect on the direction of GM i.e., GM and Prudential Short go up and down completely randomly.
Pair Corralation between GM and Prudential Short
Allowing for the 90-day total investment horizon General Motors is expected to generate 11.58 times more return on investment than Prudential Short. However, GM is 11.58 times more volatile than Prudential Short Term Porate. It trades about 0.08 of its potential returns per unit of risk. Prudential Short Term Porate is currently generating about 0.16 per unit of risk. If you would invest 3,275 in General Motors on September 12, 2024 and sell it today you would earn a total of 1,999 from holding General Motors or generate 61.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
General Motors vs. Prudential Short Term Porate
Performance |
| Timeline |
| General Motors |
| Prudential Short Term |
GM and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Prudential Short
The main advantage of trading using opposite GM and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Prudential Short 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 Short will offset losses from the drop in Prudential Short's long position.The idea behind General Motors and Prudential Short Term Porate 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 Short vs. Simt Multi Asset Inflation | Prudential Short vs. Blackrock Inflation Protected | Prudential Short vs. Atac Inflation Rotation | Prudential Short vs. Short Duration Inflation |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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