Correlation Between Prudential High and Strategic Asset
Can any of the company-specific risk be diversified away by investing in both Prudential High and Strategic 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 High and Strategic Asset 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 Strategic Asset Management, you can compare the effects of market volatilities on Prudential High and Strategic 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 High with a short position of Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Strategic Asset.
Diversification Opportunities for Prudential High and Strategic Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Strategic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana 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 Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of Prudential High i.e., Prudential High and Strategic Asset go up and down completely randomly.
Pair Corralation between Prudential High and Strategic Asset
Assuming the 90 days horizon Prudential High is expected to generate 3.97 times less return on investment than Strategic Asset. But when comparing it to its historical volatility, Prudential High Yield is 3.32 times less risky than Strategic Asset. It trades about 0.08 of its potential returns per unit of risk. Strategic Asset Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,096 in Strategic Asset Management on September 14, 2024 and sell it today you would earn a total of 17.00 from holding Strategic Asset Management or generate 0.81% 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. Strategic Asset Management
Performance |
| Timeline |
| Prudential High Yield |
| Strategic Asset Mana |
Prudential High and Strategic Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Strategic Asset
The main advantage of trading using opposite Prudential High and Strategic Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Strategic 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 Strategic Asset will offset losses from the drop in Strategic Asset's long position.The idea behind Prudential High Yield and Strategic Asset Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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