Correlation Between Prudential Core and State Street
Can any of the company-specific risk be diversified away by investing in both Prudential Core and State Street 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 State Street 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 State Street Target, you can compare the effects of market volatilities on Prudential Core and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and State Street.
Diversification Opportunities for Prudential Core and State Street
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and State is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Prudential Core i.e., Prudential Core and State Street go up and down completely randomly.
Pair Corralation between Prudential Core and State Street
Assuming the 90 days horizon Prudential Core is expected to generate 3.39 times less return on investment than State Street. But when comparing it to its historical volatility, Prudential Core Conservative is 1.09 times less risky than State Street. It trades about 0.03 of its potential returns per unit of risk. State Street Target is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,060 in State Street Target on September 4, 2024 and sell it today you would earn a total of 244.00 from holding State Street Target or generate 23.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Core Conservative vs. State Street Target
Performance |
| Timeline |
| Prudential Core Cons |
| State Street Target |
Prudential Core and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Core and State Street
The main advantage of trading using opposite Prudential Core and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Core position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. Ab Bond Inflation | State Street vs. Multisector Bond Sma | State Street vs. Ab Impact Municipal | State Street vs. Legg Mason Partners |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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