Correlation Between California Bond and Prudential Core
Can any of the company-specific risk be diversified away by investing in both California Bond and Prudential Core 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 California Bond and Prudential Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Prudential E Bond, you can compare the effects of market volatilities on California Bond and Prudential Core 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 California Bond with a short position of Prudential Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Prudential Core.
Diversification Opportunities for California Bond and Prudential Core
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Prudential is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Prudential E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential E Bond and California Bond 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 California Bond Fund are associated (or correlated) with Prudential Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential E Bond has no effect on the direction of California Bond i.e., California Bond and Prudential Core go up and down completely randomly.
Pair Corralation between California Bond and Prudential Core
Assuming the 90 days horizon California Bond Fund is expected to generate 0.93 times more return on investment than Prudential Core. However, California Bond Fund is 1.07 times less risky than Prudential Core. It trades about 0.06 of its potential returns per unit of risk. Prudential E Bond is currently generating about -0.06 per unit of risk. If you would invest 1,043 in California Bond Fund on September 5, 2024 and sell it today you would earn a total of 10.00 from holding California Bond Fund or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Prudential E Bond
Performance |
| Timeline |
| California Bond |
| Prudential E Bond |
California Bond and Prudential Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Prudential Core
The main advantage of trading using opposite California Bond and Prudential Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Prudential Core 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 Core will offset losses from the drop in Prudential Core's long position.| California Bond vs. Maryland Short Term Tax Free | California Bond vs. Siit Ultra Short | California Bond vs. Calvert Short Duration | California Bond vs. Rbc Short Duration |
| Prudential Core vs. Sei Daily Income | Prudential Core vs. Bbh Intermediate Municipal | Prudential Core vs. Legg Mason Partners | Prudential Core vs. California Bond Fund |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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