Correlation Between Prudential Corporate and Prudential Absolute
Can any of the company-specific risk be diversified away by investing in both Prudential Corporate and Prudential Absolute 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 Prudential Absolute 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 Prudential Absolute Return, you can compare the effects of market volatilities on Prudential Corporate and Prudential Absolute 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 Prudential Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Corporate and Prudential Absolute.
Diversification Opportunities for Prudential Corporate and Prudential Absolute
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Prudential is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Porate Bond and Prudential Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Absolute 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 Prudential Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Absolute has no effect on the direction of Prudential Corporate i.e., Prudential Corporate and Prudential Absolute go up and down completely randomly.
Pair Corralation between Prudential Corporate and Prudential Absolute
Assuming the 90 days horizon Prudential Porate Bond is expected to generate 2.76 times more return on investment than Prudential Absolute. However, Prudential Corporate is 2.76 times more volatile than Prudential Absolute Return. It trades about 0.1 of its potential returns per unit of risk. Prudential Absolute Return is currently generating about 0.18 per unit of risk. If you would invest 967.00 in Prudential Porate Bond on September 1, 2024 and sell it today you would earn a total of 42.00 from holding Prudential Porate Bond or generate 4.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Prudential Porate Bond vs. Prudential Absolute Return
Performance |
| Timeline |
| Prudential Porate Bond |
| Prudential Absolute |
Prudential Corporate and Prudential Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Corporate and Prudential Absolute
The main advantage of trading using opposite Prudential Corporate and Prudential Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Corporate position performs unexpectedly, Prudential Absolute 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 Absolute will offset losses from the drop in Prudential Absolute's long position.| Prudential Corporate vs. Artisan Emerging Markets | Prudential Corporate vs. Doubleline Emerging Markets | Prudential Corporate vs. Locorr Market Trend | Prudential Corporate vs. Sp Midcap Index |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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