Correlation Between Prudential Health and Lifestyle
Can any of the company-specific risk be diversified away by investing in both Prudential Health and Lifestyle 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 Health and Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Health Sciences and Lifestyle Ii Moderate, you can compare the effects of market volatilities on Prudential Health and Lifestyle 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 Health with a short position of Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Lifestyle.
Diversification Opportunities for Prudential Health and Lifestyle
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and Lifestyle is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Lifestyle Ii Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestyle Ii Moderate and Prudential Health 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 Health Sciences are associated (or correlated) with Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestyle Ii Moderate has no effect on the direction of Prudential Health i.e., Prudential Health and Lifestyle go up and down completely randomly.
Pair Corralation between Prudential Health and Lifestyle
Assuming the 90 days horizon Prudential Health is expected to generate 2.18 times less return on investment than Lifestyle. In addition to that, Prudential Health is 3.69 times more volatile than Lifestyle Ii Moderate. It trades about 0.05 of its total potential returns per unit of risk. Lifestyle Ii Moderate is currently generating about 0.37 per unit of volatility. If you would invest 1,095 in Lifestyle Ii Moderate on September 2, 2024 and sell it today you would earn a total of 28.00 from holding Lifestyle Ii Moderate or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Health Sciences vs. Lifestyle Ii Moderate
Performance |
| Timeline |
| Prudential Health |
| Lifestyle Ii Moderate |
Prudential Health and Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Health and Lifestyle
The main advantage of trading using opposite Prudential Health and Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health position performs unexpectedly, Lifestyle 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 Lifestyle will offset losses from the drop in Lifestyle's long position.The idea behind Prudential Health Sciences and Lifestyle Ii Moderate 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.
| Lifestyle vs. Regional Bank Fund | Lifestyle vs. Regional Bank Fund | Lifestyle vs. Multimanager Lifestyle Moderate | Lifestyle vs. Multimanager Lifestyle Balanced |
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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