Correlation Between Gmo High and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Gmo High and Prudential Health 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 Gmo High and Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Prudential Health Sciences, you can compare the effects of market volatilities on Gmo High and Prudential Health 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 Gmo High with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Prudential Health.
Diversification Opportunities for Gmo High and Prudential Health
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GMO and Prudential is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Gmo 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 Gmo High Yield are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Gmo High i.e., Gmo High and Prudential Health go up and down completely randomly.
Pair Corralation between Gmo High and Prudential Health
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.15 times more return on investment than Prudential Health. However, Gmo High Yield is 6.62 times less risky than Prudential Health. It trades about 0.36 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about 0.02 per unit of risk. If you would invest 1,784 in Gmo High Yield on September 4, 2024 and sell it today you would earn a total of 25.00 from holding Gmo High Yield or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Prudential Health Sciences
Performance |
| Timeline |
| Gmo High Yield |
| Prudential Health |
Gmo High and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Prudential Health
The main advantage of trading using opposite Gmo High and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Prudential Health 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 Health will offset losses from the drop in Prudential Health's long position.| Gmo High vs. California High Yield Municipal | Gmo High vs. Siit High Yield | Gmo High vs. Pace High Yield |
| Prudential Health vs. Gmo High Yield | Prudential Health vs. Artisan High Income | Prudential Health vs. Dunham High Yield | Prudential Health vs. Fidelity Capital Income |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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