Correlation Between Ab Value and Prudential Emerging

Can any of the company-specific risk be diversified away by investing in both Ab Value and Prudential Emerging 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 Ab Value and Prudential Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Value Fund and Prudential Emerging Markets, you can compare the effects of market volatilities on Ab Value and Prudential Emerging 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 Ab Value with a short position of Prudential Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Prudential Emerging.

Diversification Opportunities for Ab Value and Prudential Emerging

-0.62

Correlation Coefficient

Ab Value  Prudential Emerging

Excellent diversification

The 3 months correlation between ABVCX and Prudential is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging and Ab Value 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 Ab Value Fund are associated (or correlated) with Prudential Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Emerging has no effect on the direction of Ab Value i.e., Ab Value and Prudential Emerging go up and down completely randomly.

Pair Corralation between Ab Value and Prudential Emerging

Assuming the 90 days horizon Ab Value Fund is expected to generate 1.78 times more return on investment than Prudential Emerging. However, Ab Value is 1.78 times more volatile than Prudential Emerging Markets. It trades about 0.16 of its potential returns per unit of risk. Prudential Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest  1,799  in Ab Value Fund on September 2, 2024 and sell it today you would earn a total of  277.00  from holding Ab Value Fund or generate 15.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ab Value Fund  vs.  Prudential Emerging Markets

Ab Value Fund

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Value and Prudential Emerging

The main advantage of trading using opposite Ab Value and Prudential Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value position performs unexpectedly, Prudential Emerging 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 Emerging will offset losses from the drop in Prudential Emerging's long position.

The idea behind Ab Value Fund and Prudential Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.