Correlation Between Prudential High and Financial Services
Can any of the company-specific risk be diversified away by investing in both Prudential High and Financial Services 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 Financial Services 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 Financial Services Fund, you can compare the effects of market volatilities on Prudential High and Financial Services 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 Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Financial Services.
Diversification Opportunities for Prudential High and Financial Services
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Financial is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services 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 Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Prudential High i.e., Prudential High and Financial Services go up and down completely randomly.
Pair Corralation between Prudential High and Financial Services
Assuming the 90 days horizon Prudential High is expected to generate 2.17 times less return on investment than Financial Services. But when comparing it to its historical volatility, Prudential High Yield is 3.34 times less risky than Financial Services. It trades about 0.13 of its potential returns per unit of risk. Financial Services Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,941 in Financial Services Fund on September 12, 2024 and sell it today you would earn a total of 2,821 from holding Financial Services Fund or generate 47.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Prudential High Yield vs. Financial Services Fund
Performance |
| Timeline |
| Prudential High Yield |
| Financial Services |
Prudential High and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Financial Services
The main advantage of trading using opposite Prudential High and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Prudential High vs. SCOR PK | Prudential High vs. Morningstar Unconstrained Allocation | Prudential High vs. Via Renewables | Prudential High vs. Bondbloxx ETF Trust |
| Financial Services vs. Pax High Yield | Financial Services vs. Prudential High Yield | Financial Services vs. Guggenheim High Yield | Financial Services vs. City National Rochdale |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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