Correlation Between Prudential Core and New Economy
Can any of the company-specific risk be diversified away by investing in both Prudential Core and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Prudential Core and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and New Economy.
Diversification Opportunities for Prudential Core and New Economy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and New is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Prudential Core i.e., Prudential Core and New Economy go up and down completely randomly.
Pair Corralation between Prudential Core and New Economy
Assuming the 90 days horizon Prudential Core is expected to generate 4.11 times less return on investment than New Economy. But when comparing it to its historical volatility, Prudential Core Conservative is 2.64 times less risky than New Economy. It trades about 0.06 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,182 in New Economy Fund on September 4, 2024 and sell it today you would earn a total of 1,332 from holding New Economy Fund or generate 25.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Core Conservative vs. New Economy Fund
Performance |
| Timeline |
| Prudential Core Cons |
| New Economy Fund |
Prudential Core and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Core and New Economy
The main advantage of trading using opposite Prudential Core and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Prudential Core vs. Lord Abbett High | Prudential Core vs. Pioneer High Yield | Prudential Core vs. Dunham High Yield | Prudential Core vs. Guggenheim High Yield |
| New Economy vs. Jhancock Diversified Macro | New Economy vs. Prudential Core Conservative | New Economy vs. Calvert Conservative Allocation | New Economy vs. Huber Capital 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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