Correlation Between Prudential Health and New Economy
Can any of the company-specific risk be diversified away by investing in both Prudential Health and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Prudential Health and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and New Economy.
Diversification Opportunities for Prudential Health and New Economy
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and New is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Prudential Health i.e., Prudential Health and New Economy go up and down completely randomly.
Pair Corralation between Prudential Health and New Economy
Assuming the 90 days horizon Prudential Health Sciences is expected to under-perform the New Economy. In addition to that, Prudential Health is 1.21 times more volatile than New Economy Fund. It trades about -0.11 of its total potential returns per unit of risk. New Economy Fund is currently generating about 0.05 per unit of volatility. If you would invest 6,726 in New Economy Fund on August 25, 2024 and sell it today you would earn a total of 64.00 from holding New Economy Fund or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Health Sciences vs. New Economy Fund
Performance |
| Timeline |
| Prudential Health |
| New Economy Fund |
Prudential Health and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Health and New Economy
The main advantage of trading using opposite Prudential Health and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Prudential Health vs. Columbia Vertible Securities | Prudential Health vs. Rationalpier 88 Convertible | Prudential Health vs. Franklin Vertible Securities | Prudential Health vs. Allianzgi Vertible Fund |
| New Economy vs. Alger Health Sciences | New Economy vs. Prudential Health Sciences | New Economy vs. Blackrock Health Sciences | New Economy vs. Live Oak Health |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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