Correlation Between Prudential Muni and Prudential Corporate
Can any of the company-specific risk be diversified away by investing in both Prudential Muni and Prudential Corporate 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 Muni and Prudential Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Muni High and Prudential Porate Bond, you can compare the effects of market volatilities on Prudential Muni and Prudential Corporate 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 Muni with a short position of Prudential Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Muni and Prudential Corporate.
Diversification Opportunities for Prudential Muni and Prudential Corporate
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Prudential is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Muni High and Prudential Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Porate Bond and Prudential Muni 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 Muni High are associated (or correlated) with Prudential Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Porate Bond has no effect on the direction of Prudential Muni i.e., Prudential Muni and Prudential Corporate go up and down completely randomly.
Pair Corralation between Prudential Muni and Prudential Corporate
Assuming the 90 days horizon Prudential Muni High is expected to generate 0.78 times more return on investment than Prudential Corporate. However, Prudential Muni High is 1.27 times less risky than Prudential Corporate. It trades about 0.24 of its potential returns per unit of risk. Prudential Porate Bond is currently generating about 0.12 per unit of risk. If you would invest 950.00 in Prudential Muni High on September 1, 2024 and sell it today you would earn a total of 17.00 from holding Prudential Muni High or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Muni High vs. Prudential Porate Bond
Performance |
| Timeline |
| Prudential Muni High |
| Prudential Porate Bond |
Prudential Muni and Prudential Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Muni and Prudential Corporate
The main advantage of trading using opposite Prudential Muni and Prudential Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Muni position performs unexpectedly, Prudential Corporate 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 Prudential Corporate will offset losses from the drop in Prudential Corporate's long position.| Prudential Muni vs. Ishares Municipal Bond | Prudential Muni vs. Nuveen Arizona Municipal | Prudential Muni vs. T Rowe Price | Prudential Muni vs. Franklin High Yield |
| Prudential Corporate vs. Artisan Emerging Markets | Prudential Corporate vs. Doubleline Emerging Markets | Prudential Corporate vs. Locorr Market Trend | Prudential Corporate vs. Sp Midcap Index |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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