Correlation Between Small Cap and Prudential Short
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Prudential Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Prudential Short Duration, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Prudential Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Prudential Short.
Diversification Opportunities for Small Cap and Prudential Short
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Prudential is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Prudential Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Duration and Small Cap 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 Small Cap Equity 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 Duration has no effect on the direction of Small Cap i.e., Small Cap and Prudential Short go up and down completely randomly.
Pair Corralation between Small Cap and Prudential Short
If you would invest 846.00 in Prudential Short Duration on September 13, 2024 and sell it today you would earn a total of 0.00 from holding Prudential Short Duration or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Prudential Short Duration
Performance |
| Timeline |
| Small Cap Equity |
| Prudential Short Duration |
Small Cap and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Prudential Short
The main advantage of trading using opposite Small Cap and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Black Oak Emerging | Small Cap vs. Transamerica Emerging Markets | Small Cap vs. Barings Emerging Markets | Small Cap vs. Dws Emerging Markets |
| Prudential Short vs. Virtus Seix Government | Prudential Short vs. Elfun Government Money | Prudential Short vs. Aig Government Money | Prudential Short vs. Us Government Securities |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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