Correlation Between Prudential Health and Western Asset
Can any of the company-specific risk be diversified away by investing in both Prudential Health and Western Asset 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 Western Asset 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 Western Asset Inflation, you can compare the effects of market volatilities on Prudential Health and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Western Asset.
Diversification Opportunities for Prudential Health and Western Asset
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Western is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Prudential Health i.e., Prudential Health and Western Asset go up and down completely randomly.
Pair Corralation between Prudential Health and Western Asset
Assuming the 90 days horizon Prudential Health Sciences is expected to under-perform the Western Asset. In addition to that, Prudential Health is 3.15 times more volatile than Western Asset Inflation. It trades about -0.08 of its total potential returns per unit of risk. Western Asset Inflation is currently generating about -0.06 per unit of volatility. If you would invest 946.00 in Western Asset Inflation on September 13, 2024 and sell it today you would lose (7.00) from holding Western Asset Inflation or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Health Sciences vs. Western Asset Inflation
Performance |
| Timeline |
| Prudential Health |
| Western Asset Inflation |
Prudential Health and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Health and Western Asset
The main advantage of trading using opposite Prudential Health and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Prudential Health vs. Ab Global Risk | Prudential Health vs. Calvert High Yield | Prudential Health vs. Artisan High Income | Prudential Health vs. Ab Global Risk |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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