Correlation Between The Fixed and Prudential Emerging

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

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

Diversification Opportunities for The Fixed and Prudential Emerging

0.62

Correlation Coefficient

The Fixed  Prudential Emerging

Poor diversification

The 3 months correlation between THE and Prudential is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging and The Fixed 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 The Fixed Income 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 The Fixed i.e., The Fixed and Prudential Emerging go up and down completely randomly.

Pair Corralation between The Fixed and Prudential Emerging

Assuming the 90 days horizon The Fixed Income is expected to generate 0.61 times more return on investment than Prudential Emerging. However, The Fixed Income is 1.64 times less risky than Prudential Emerging. It trades about 0.08 of its potential returns per unit of risk. Prudential Emerging Markets is currently generating about -0.13 per unit of risk. If you would invest  733.00  in The Fixed Income on September 5, 2024 and sell it today you would earn a total of  9.00  from holding The Fixed Income or generate 1.23% return on investment over 90 days.

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

The Fixed Income  vs.  Prudential Emerging Markets

Fixed Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Fixed Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fundamental 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 The Fixed and Prudential Emerging

The main advantage of trading using opposite The Fixed and Prudential Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Fixed 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 The Fixed Income 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.