Correlation Between Quantitative and Prudential Utility
Can any of the company-specific risk be diversified away by investing in both Quantitative and Prudential Utility 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 Quantitative and Prudential Utility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quantitative U S and Prudential Utility Fund, you can compare the effects of market volatilities on Quantitative and Prudential Utility 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 Quantitative with a short position of Prudential Utility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative and Prudential Utility.
Diversification Opportunities for Quantitative and Prudential Utility
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Quantitative and Prudential is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative U S and Prudential Utility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Utility and Quantitative 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 Quantitative U S are associated (or correlated) with Prudential Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Utility has no effect on the direction of Quantitative i.e., Quantitative and Prudential Utility go up and down completely randomly.
Pair Corralation between Quantitative and Prudential Utility
Assuming the 90 days horizon Quantitative is expected to generate 1.13 times less return on investment than Prudential Utility. But when comparing it to its historical volatility, Quantitative U S is 1.48 times less risky than Prudential Utility. It trades about 0.12 of its potential returns per unit of risk. Prudential Utility Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,354 in Prudential Utility Fund on August 26, 2024 and sell it today you would earn a total of 361.00 from holding Prudential Utility Fund or generate 26.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quantitative U S vs. Prudential Utility Fund
Performance |
| Timeline |
| Quantitative U S |
| Prudential Utility |
Quantitative and Prudential Utility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quantitative and Prudential Utility
The main advantage of trading using opposite Quantitative and Prudential Utility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative position performs unexpectedly, Prudential Utility 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 Utility will offset losses from the drop in Prudential Utility's long position.| Quantitative vs. Franklin Natural Resources | Quantitative vs. Firsthand Alternative Energy | Quantitative vs. Short Oil Gas | Quantitative vs. Gmo Resources |
| Prudential Utility vs. Quantitative U S | Prudential Utility vs. Jhancock Disciplined Value | Prudential Utility vs. Aqr Large Cap | Prudential Utility vs. Knights Of Umbus |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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