Correlation Between Prudential Short and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Prudential Short and Franklin Federal 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 Franklin Federal 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 Franklin Federal Limited Term, you can compare the effects of market volatilities on Prudential Short and Franklin Federal 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 Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short and Franklin Federal.
Diversification Opportunities for Prudential Short and Franklin Federal
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Franklin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim 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 Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Prudential Short i.e., Prudential Short and Franklin Federal go up and down completely randomly.
Pair Corralation between Prudential Short and Franklin Federal
Assuming the 90 days horizon Prudential Short Duration is expected to generate 2.21 times more return on investment than Franklin Federal. However, Prudential Short is 2.21 times more volatile than Franklin Federal Limited Term. It trades about 0.15 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.15 per unit of risk. If you would invest 712.00 in Prudential Short Duration on September 14, 2024 and sell it today you would earn a total of 134.00 from holding Prudential Short Duration or generate 18.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Short Duration vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Prudential Short Duration |
| Franklin Federal Lim |
Prudential Short and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Short and Franklin Federal
The main advantage of trading using opposite Prudential Short and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Short position performs unexpectedly, Franklin Federal 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 Franklin Federal will offset losses from the drop in Franklin Federal's long position.| Prudential Short vs. T Rowe Price | Prudential Short vs. Ab Small Cap | Prudential Short vs. Versatile Bond Portfolio | Prudential Short vs. L Abbett Fundamental |
| Franklin Federal vs. Alliancebernstein National Municipal | Franklin Federal vs. California High Yield Municipal | Franklin Federal vs. Gamco Global Telecommunications | Franklin Federal vs. T Rowe Price |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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