Correlation Between Prudential Government and Eagle Growth
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Eagle Growth 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 Government and Eagle Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Government Money and Eagle Growth Income, you can compare the effects of market volatilities on Prudential Government and Eagle Growth 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 Government with a short position of Eagle Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Eagle Growth.
Diversification Opportunities for Prudential Government and Eagle Growth
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prudential and Eagle is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Eagle Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Growth Income and Prudential Government 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 Government Money are associated (or correlated) with Eagle Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Growth Income has no effect on the direction of Prudential Government i.e., Prudential Government and Eagle Growth go up and down completely randomly.
Pair Corralation between Prudential Government and Eagle Growth
Assuming the 90 days horizon Prudential Government is expected to generate 5.87 times less return on investment than Eagle Growth. But when comparing it to its historical volatility, Prudential Government Money is 4.33 times less risky than Eagle Growth. It trades about 0.1 of its potential returns per unit of risk. Eagle Growth Income is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,837 in Eagle Growth Income on September 2, 2024 and sell it today you would earn a total of 481.00 from holding Eagle Growth Income or generate 26.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Prudential Government Money vs. Eagle Growth Income
Performance |
| Timeline |
| Prudential Government |
| Eagle Growth Income |
Prudential Government and Eagle Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Eagle Growth
The main advantage of trading using opposite Prudential Government and Eagle Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Eagle Growth 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 Eagle Growth will offset losses from the drop in Eagle Growth's long position.The idea behind Prudential Government Money and Eagle Growth Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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