Correlation Between Prudential Government and Hartford Growth
Can any of the company-specific risk be diversified away by investing in both Prudential Government and Hartford 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 Hartford Growth 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 Hartford Growth Opportunities, you can compare the effects of market volatilities on Prudential Government and Hartford 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 Hartford Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Hartford Growth.
Diversification Opportunities for Prudential Government and Hartford Growth
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Hartford is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Hartford Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth Oppo 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 Hartford Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Growth Oppo has no effect on the direction of Prudential Government i.e., Prudential Government and Hartford Growth go up and down completely randomly.
Pair Corralation between Prudential Government and Hartford Growth
Assuming the 90 days horizon Prudential Government is expected to generate 11.73 times less return on investment than Hartford Growth. But when comparing it to its historical volatility, Prudential Government Income is 2.82 times less risky than Hartford Growth. It trades about 0.03 of its potential returns per unit of risk. Hartford Growth Opportunities is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,040 in Hartford Growth Opportunities on September 1, 2024 and sell it today you would earn a total of 3,183 from holding Hartford Growth Opportunities or generate 78.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Government Income vs. Hartford Growth Opportunities
Performance |
| Timeline |
| Prudential Government |
| Hartford Growth Oppo |
Prudential Government and Hartford Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Government and Hartford Growth
The main advantage of trading using opposite Prudential Government and Hartford Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Hartford 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 Hartford Growth will offset losses from the drop in Hartford Growth's long position.The idea behind Prudential Government Income and Hartford Growth Opportunities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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