Correlation Between Prudential High and Catalyst/smh High
Can any of the company-specific risk be diversified away by investing in both Prudential High and Catalyst/smh High 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 Catalyst/smh High 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 Catalystsmh High Income, you can compare the effects of market volatilities on Prudential High and Catalyst/smh High 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 Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Catalyst/smh High.
Diversification Opportunities for Prudential High and Catalyst/smh High
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Catalyst/smh is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income 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 Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Prudential High i.e., Prudential High and Catalyst/smh High go up and down completely randomly.
Pair Corralation between Prudential High and Catalyst/smh High
Assuming the 90 days horizon Prudential High is expected to generate 1.15 times less return on investment than Catalyst/smh High. But when comparing it to its historical volatility, Prudential High Yield is 1.11 times less risky than Catalyst/smh High. It trades about 0.12 of its potential returns per unit of risk. Catalystsmh High Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 307.00 in Catalystsmh High Income on August 25, 2024 and sell it today you would earn a total of 70.00 from holding Catalystsmh High Income or generate 22.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. Catalystsmh High Income
Performance |
| Timeline |
| Prudential High Yield |
| Catalystsmh High Income |
Prudential High and Catalyst/smh High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Catalyst/smh High
The main advantage of trading using opposite Prudential High and Catalyst/smh High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Catalyst/smh High 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 Catalyst/smh High will offset losses from the drop in Catalyst/smh High'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 |
| Catalyst/smh High vs. High Yield Bond | Catalyst/smh High vs. Artisan High Income | Catalyst/smh High vs. Pacific Funds High | Catalyst/smh High vs. Victory High Yield |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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