Correlation Between Prudential Government and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Emerging Markets 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 Emerging Markets 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 Emerging Markets Portfolio, you can compare the effects of market volatilities on Prudential Government and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Emerging Markets.
Diversification Opportunities for Prudential Government and Emerging Markets
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Emerging is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Prudential Government i.e., Prudential Government and Emerging Markets go up and down completely randomly.
Pair Corralation between Prudential Government and Emerging Markets
Assuming the 90 days horizon Prudential Government is expected to generate 3.27 times less return on investment than Emerging Markets. But when comparing it to its historical volatility, Prudential Government Money is 6.96 times less risky than Emerging Markets. It trades about 0.12 of its potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,754 in Emerging Markets Portfolio on December 16, 2024 and sell it today you would earn a total of 440.00 from holding Emerging Markets Portfolio or generate 25.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.38% |
| Values | Daily Returns |
Prudential Government Money vs. Emerging Markets Portfolio
Performance |
| Timeline |
| Prudential Government |
| Emerging Markets Por |
Prudential Government and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Emerging Markets
The main advantage of trading using opposite Prudential Government and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Prudential Government vs. Intermediate Bond Fund | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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