Correlation Between Prudential Short and First Trust
Can any of the company-specific risk be diversified away by investing in both Prudential Short and First Trust 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 Prudential Short and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Short Duration and First Trust Short, you can compare the effects of market volatilities on Prudential Short and First Trust 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 Prudential Short with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short and First Trust.
Diversification Opportunities for Prudential Short and First Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Prudential Short 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 Prudential Short Duration are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Prudential Short i.e., Prudential Short and First Trust go up and down completely randomly.
Pair Corralation between Prudential Short and First Trust
Assuming the 90 days horizon Prudential Short Duration is expected to generate 1.33 times more return on investment than First Trust. However, Prudential Short is 1.33 times more volatile than First Trust Short. It trades about 0.16 of its potential returns per unit of risk. First Trust Short is currently generating about 0.19 per unit of risk. If you would invest 739.00 in Prudential Short Duration on August 31, 2024 and sell it today you would earn a total of 105.00 from holding Prudential Short Duration or generate 14.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Short Duration vs. First Trust Short
Performance |
| Timeline |
| Prudential Short Duration |
| First Trust Short |
Prudential Short and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Short and First Trust
The main advantage of trading using opposite Prudential Short and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Short position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Prudential Short vs. Dreyfusstandish Global Fixed | Prudential Short vs. Ab Bond Inflation | Prudential Short vs. Multisector Bond Sma | Prudential Short vs. Federated Ultrashort Bond |
| First Trust vs. Prudential Short Duration | First Trust vs. Fidelity Capital Income | First Trust vs. Legg Mason Partners | First Trust vs. Federated Institutional High |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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