Correlation Between Prudential High and International Fund
Can any of the company-specific risk be diversified away by investing in both Prudential High and International Fund 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 International Fund 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 International Fund International, you can compare the effects of market volatilities on Prudential High and International Fund 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 International Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and International Fund.
Diversification Opportunities for Prudential High and International Fund
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and International is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund 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 International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Prudential High i.e., Prudential High and International Fund go up and down completely randomly.
Pair Corralation between Prudential High and International Fund
Assuming the 90 days horizon Prudential High is expected to generate 8.42 times less return on investment than International Fund. But when comparing it to its historical volatility, Prudential High Yield is 4.31 times less risky than International Fund. It trades about 0.08 of its potential returns per unit of risk. International Fund International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,761 in International Fund International on September 14, 2024 and sell it today you would earn a total of 48.00 from holding International Fund International or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. International Fund Internation
Performance |
| Timeline |
| Prudential High Yield |
| International Fund |
Prudential High and International Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and International Fund
The main advantage of trading using opposite Prudential High and International Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, International Fund 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 International Fund will offset losses from the drop in International Fund's long position.The idea behind Prudential High Yield and International Fund International 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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