Correlation Between Short Oil and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Short Oil and Prudential Health 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 Short Oil and Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Oil Gas and Prudential Health Sciences, you can compare the effects of market volatilities on Short Oil and Prudential Health 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 Short Oil with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Prudential Health.
Diversification Opportunities for Short Oil and Prudential Health
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Short and Prudential is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Short Oil 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 Short Oil Gas are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Short Oil i.e., Short Oil and Prudential Health go up and down completely randomly.
Pair Corralation between Short Oil and Prudential Health
Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Prudential Health. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Oil Gas is 1.53 times less risky than Prudential Health. The mutual fund trades about -0.75 of its potential returns per unit of risk. The Prudential Health Sciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,452 in Prudential Health Sciences on October 24, 2024 and sell it today you would earn a total of 5.00 from holding Prudential Health Sciences or generate 0.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Oil Gas vs. Prudential Health Sciences
Performance |
| Timeline |
| Short Oil Gas |
| Prudential Health |
Short Oil and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Oil and Prudential Health
The main advantage of trading using opposite Short Oil and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Oil position performs unexpectedly, Prudential Health 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 Prudential Health will offset losses from the drop in Prudential Health's long position.| Short Oil vs. Blackrock Global Longshort | Short Oil vs. Baird Short Term Bond | Short Oil vs. Fidelity Flex Servative | Short Oil vs. Delaware Investments Ultrashort |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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