Correlation Between Prudential Government and Fidelity Stock
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Fidelity Stock 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 Fidelity Stock 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 Fidelity Stock Selector, you can compare the effects of market volatilities on Prudential Government and Fidelity Stock 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 Fidelity Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Fidelity Stock.
Diversification Opportunities for Prudential Government and Fidelity Stock
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Fidelity is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector 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 Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Prudential Government i.e., Prudential Government and Fidelity Stock go up and down completely randomly.
Pair Corralation between Prudential Government and Fidelity Stock
Assuming the 90 days horizon Prudential Government is expected to generate 10.48 times less return on investment than Fidelity Stock. But when comparing it to its historical volatility, Prudential Government Income is 1.91 times less risky than Fidelity Stock. It trades about 0.06 of its potential returns per unit of risk. Fidelity Stock Selector is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,825 in Fidelity Stock Selector on August 30, 2024 and sell it today you would earn a total of 158.00 from holding Fidelity Stock Selector or generate 5.59% 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. Fidelity Stock Selector
Performance |
| Timeline |
| Prudential Government |
| Fidelity Stock Selector |
Prudential Government and Fidelity Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Fidelity Stock
The main advantage of trading using opposite Prudential Government and Fidelity Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Fidelity Stock 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 Fidelity Stock will offset losses from the drop in Fidelity Stock's long position.The idea behind Prudential Government Income and Fidelity Stock Selector 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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