Correlation Between Prudential High and Hennessy
Can any of the company-specific risk be diversified away by investing in both Prudential High and Hennessy 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 Hennessy 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 Hennessy Bp Midstream, you can compare the effects of market volatilities on Prudential High and Hennessy 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 Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Hennessy.
Diversification Opportunities for Prudential High and Hennessy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Hennessy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Hennessy Bp Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Midstream 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 Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Midstream has no effect on the direction of Prudential High i.e., Prudential High and Hennessy go up and down completely randomly.
Pair Corralation between Prudential High and Hennessy
Assuming the 90 days horizon Prudential High is expected to generate 4.36 times less return on investment than Hennessy. But when comparing it to its historical volatility, Prudential High Yield is 8.4 times less risky than Hennessy. It trades about 0.22 of its potential returns per unit of risk. Hennessy Bp Midstream is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,357 in Hennessy Bp Midstream on November 4, 2024 and sell it today you would earn a total of 47.00 from holding Hennessy Bp Midstream or generate 3.46% 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. Hennessy Bp Midstream
Performance |
| Timeline |
| Prudential High Yield |
| Hennessy Bp Midstream |
Prudential High and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Hennessy
The main advantage of trading using opposite Prudential High and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Hennessy 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 Hennessy will offset losses from the drop in Hennessy'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 |
| Hennessy vs. Asg Managed Futures | Hennessy vs. Guidepath Managed Futures | Hennessy vs. Guggenheim Managed Futures | Hennessy vs. Cref Inflation Linked Bond |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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