Correlation Between Prudential Core and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Prudential Core and Banking 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 Core and Banking Fund 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 Banking Fund Class, you can compare the effects of market volatilities on Prudential Core and Banking 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 Core with a short position of Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and Banking Fund.
Diversification Opportunities for Prudential Core and Banking Fund
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Banking is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class 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 Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Prudential Core i.e., Prudential Core and Banking Fund go up and down completely randomly.
Pair Corralation between Prudential Core and Banking Fund
Assuming the 90 days horizon Prudential Core Conservative is expected to under-perform the Banking Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Core Conservative is 7.32 times less risky than Banking Fund. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Banking Fund Class is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 9,098 in Banking Fund Class on August 28, 2024 and sell it today you would earn a total of 1,091 from holding Banking Fund Class or generate 11.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Core Conservative vs. Banking Fund Class
Performance |
| Timeline |
| Prudential Core Cons |
| Banking Fund Class |
Prudential Core and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Core and Banking Fund
The main advantage of trading using opposite Prudential Core and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core position performs unexpectedly, Banking 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 Banking Fund will offset losses from the drop in Banking Fund's long position.The idea behind Prudential Core Conservative and Banking Fund Class 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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