Correlation Between Calamos Hedged and Prudential Floating

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

By analyzing existing cross correlation between Calamos Hedged Equity and Prudential Floating Rate, you can compare the effects of market volatilities on Calamos Hedged and Prudential Floating 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 Calamos Hedged with a short position of Prudential Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calamos Hedged and Prudential Floating.

Diversification Opportunities for Calamos Hedged and Prudential Floating

0.52

Correlation Coefficient

Calamos Hedged  Prudential Floating

Very weak diversification

The 3 months correlation between Calamos and Prudential is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Calamos Hedged Equity and Prudential Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Floating Rate and Calamos Hedged 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 Calamos Hedged Equity are associated (or correlated) with Prudential Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Floating Rate has no effect on the direction of Calamos Hedged i.e., Calamos Hedged and Prudential Floating go up and down completely randomly.

Pair Corralation between Calamos Hedged and Prudential Floating

Assuming the 90 days horizon Calamos Hedged Equity is expected to under-perform the Prudential Floating. In addition to that, Calamos Hedged is 4.13 times more volatile than Prudential Floating Rate. It trades about -0.07 of its total potential returns per unit of risk. Prudential Floating Rate is currently generating about -0.02 per unit of volatility. If you would invest  903.00  in Prudential Floating Rate on December 31, 2024 and sell it today you would lose (2.00) from holding Prudential Floating Rate or give up 0.22% of portfolio value over 90 days.

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

Calamos Hedged Equity  vs.  Prudential Floating Rate

Calamos Hedged Equity

Risk-Adjusted Performance

Very Weak

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

Prudential Floating Rate

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Calamos Hedged and Prudential Floating

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

The idea behind Calamos Hedged Equity and Prudential Floating Rate 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.