Correlation Between Prudential Government and Dunham Large
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Dunham Large 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 Dunham Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Government Income and Dunham Large Cap, you can compare the effects of market volatilities on Prudential Government and Dunham Large 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 Dunham Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Dunham Large.
Diversification Opportunities for Prudential Government and Dunham Large
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Dunham is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Dunham Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dunham Large Cap 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 Income are associated (or correlated) with Dunham Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dunham Large Cap has no effect on the direction of Prudential Government i.e., Prudential Government and Dunham Large go up and down completely randomly.
Pair Corralation between Prudential Government and Dunham Large
Assuming the 90 days horizon Prudential Government Income is expected to under-perform the Dunham Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Government Income is 2.1 times less risky than Dunham Large. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Dunham Large Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,984 in Dunham Large Cap on August 28, 2024 and sell it today you would earn a total of 146.00 from holding Dunham Large Cap or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Government Income vs. Dunham Large Cap
Performance |
| Timeline |
| Prudential Government |
| Dunham Large Cap |
Prudential Government and Dunham Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Dunham Large
The main advantage of trading using opposite Prudential Government and Dunham Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Dunham Large 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 Dunham Large will offset losses from the drop in Dunham Large's long position.The idea behind Prudential Government Income and Dunham Large Cap 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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