Correlation Between Prudential High and Global Small
Can any of the company-specific risk be diversified away by investing in both Prudential High and Global Small 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 High and Global Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential High Yield and Global Small Cap, you can compare the effects of market volatilities on Prudential High and Global Small 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 High with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Global Small.
Diversification Opportunities for Prudential High and Global Small
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap and Prudential High 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 High Yield are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Prudential High i.e., Prudential High and Global Small go up and down completely randomly.
Pair Corralation between Prudential High and Global Small
Assuming the 90 days horizon Prudential High is expected to generate 5.79 times less return on investment than Global Small. But when comparing it to its historical volatility, Prudential High Yield is 5.37 times less risky than Global Small. It trades about 0.12 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,896 in Global Small Cap on September 12, 2024 and sell it today you would earn a total of 140.00 from holding Global Small Cap or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Prudential High Yield vs. Global Small Cap
Performance |
| Timeline |
| Prudential High Yield |
| Global Small Cap |
Prudential High and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Global Small
The main advantage of trading using opposite Prudential High and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Global Small 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 Global Small will offset losses from the drop in Global Small's long position.| Prudential High vs. Prudential Total Return | Prudential High vs. Metropolitan West Total | Prudential High vs. John Hancock Disciplined | Prudential High vs. Europacific Growth Fund |
| Global Small vs. Third Avenue Real | Global Small vs. Third Avenue Small Cap | Global Small vs. Smead Value Fund | Global Small vs. Baron Focused Growth |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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