Correlation Between NYSE Composite and Prudential Muni
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Prudential Muni 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 NYSE Composite and Prudential Muni into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Prudential Muni High, you can compare the effects of market volatilities on NYSE Composite and Prudential Muni 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 NYSE Composite with a short position of Prudential Muni. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Prudential Muni.
Diversification Opportunities for NYSE Composite and Prudential Muni
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Prudential is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Prudential Muni High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Muni High and NYSE Composite 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 NYSE Composite are associated (or correlated) with Prudential Muni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Muni High has no effect on the direction of NYSE Composite i.e., NYSE Composite and Prudential Muni go up and down completely randomly.
Pair Corralation between NYSE Composite and Prudential Muni
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Prudential Muni. In addition to that, NYSE Composite is 2.35 times more volatile than Prudential Muni High. It trades about -0.02 of its total potential returns per unit of risk. Prudential Muni High is currently generating about 0.2 per unit of volatility. If you would invest 942.00 in Prudential Muni High on November 28, 2024 and sell it today you would earn a total of 10.00 from holding Prudential Muni High or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Prudential Muni High
Performance |
| Timeline |
NYSE Composite and Prudential Muni Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Prudential Muni High
Pair trading matchups for Prudential Muni
Pair Trading with NYSE Composite and Prudential Muni
The main advantage of trading using opposite NYSE Composite and Prudential Muni positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Prudential Muni 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 Muni will offset losses from the drop in Prudential Muni's long position.| NYSE Composite vs. Inter Parfums | NYSE Composite vs. Amkor Technology | NYSE Composite vs. Unilever PLC ADR | NYSE Composite vs. Estee Lauder Companies |
| Prudential Muni vs. Davis Financial Fund | Prudential Muni vs. Fidelity Advisor Financial | Prudential Muni vs. John Hancock Financial | Prudential Muni vs. Financials Ultrasector Profund |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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