Correlation Between Prudential Short and Highland Longshort

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

By analyzing existing cross correlation between Prudential Short Duration and Highland Longshort Healthcare, you can compare the effects of market volatilities on Prudential Short and Highland Longshort 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 Short with a short position of Highland Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short and Highland Longshort.

Diversification Opportunities for Prudential Short and Highland Longshort

0.3

Correlation Coefficient

Prudential Short  Highland Longshort

Weak diversification

The 3 months correlation between Prudential and Highland is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Prudential Short 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 Short Duration are associated (or correlated) with Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Prudential Short i.e., Prudential Short and Highland Longshort go up and down completely randomly.

Pair Corralation between Prudential Short and Highland Longshort

Assuming the 90 days horizon Prudential Short Duration is expected to under-perform the Highland Longshort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Short Duration is 1.31 times less risky than Highland Longshort. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Highland Longshort Healthcare is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,637  in Highland Longshort Healthcare on September 30, 2024 and sell it today you would earn a total of  2.00  from holding Highland Longshort Healthcare or generate 0.12% return on investment over 90 days.

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

Prudential Short Duration  vs.  Highland Longshort Healthcare

Prudential Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Highland Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential Short and Highland Longshort

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

The idea behind Prudential Short Duration and Highland Longshort Healthcare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.