Correlation Between Prudential Corporate and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Prudential Corporate and Dow Jones 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 Corporate and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Porate Bond and Dow Jones Industrial, you can compare the effects of market volatilities on Prudential Corporate and Dow Jones 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 Corporate with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Corporate and Dow Jones.
Diversification Opportunities for Prudential Corporate and Dow Jones
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and Dow is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Porate Bond and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Prudential Corporate 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 Porate Bond are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Prudential Corporate i.e., Prudential Corporate and Dow Jones go up and down completely randomly.
Pair Corralation between Prudential Corporate and Dow Jones
Assuming the 90 days horizon Prudential Porate Bond is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Porate Bond is 2.24 times less risky than Dow Jones. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,233,015 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 253,016 from holding Dow Jones Industrial or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Porate Bond vs. Dow Jones Industrial
Performance |
| Timeline |
Prudential Corporate and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Prudential Porate Bond
Pair trading matchups for Prudential Corporate
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Prudential Corporate and Dow Jones
The main advantage of trading using opposite Prudential Corporate and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Corporate position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Prudential Corporate vs. Prudential High Yield | Prudential Corporate vs. Pia High Yield | Prudential Corporate vs. Dunham High Yield | Prudential Corporate vs. Pace High Yield |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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