Correlation Between Prudential Core and American Funds
Can any of the company-specific risk be diversified away by investing in both Prudential Core and American Funds 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 Core and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Core Conservative and American Funds Inflation, you can compare the effects of market volatilities on Prudential Core and American Funds 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 Core with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and American Funds.
Diversification Opportunities for Prudential Core and American Funds
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and American Funds Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Inflation and Prudential Core 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 Core Conservative are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Inflation has no effect on the direction of Prudential Core i.e., Prudential Core and American Funds go up and down completely randomly.
Pair Corralation between Prudential Core and American Funds
Assuming the 90 days horizon Prudential Core Conservative is expected to generate 1.06 times more return on investment than American Funds. However, Prudential Core is 1.06 times more volatile than American Funds Inflation. It trades about 0.04 of its potential returns per unit of risk. American Funds Inflation is currently generating about 0.02 per unit of risk. If you would invest 799.00 in Prudential Core Conservative on September 20, 2024 and sell it today you would earn a total of 58.00 from holding Prudential Core Conservative or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Core Conservative vs. American Funds Inflation
Performance |
| Timeline |
| Prudential Core Cons |
| American Funds Inflation |
Prudential Core and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Core and American Funds
The main advantage of trading using opposite Prudential Core and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.The idea behind Prudential Core Conservative and American Funds Inflation 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.
| American Funds vs. Prudential Core Conservative | American Funds vs. Elfun Diversified Fund | American Funds vs. Guggenheim Diversified Income | American Funds vs. Delaware Limited Term Diversified |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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