Correlation Between Prudential Short and VivoPower International

Can any of the company-specific risk be diversified away by investing in both Prudential Short and VivoPower International 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 VivoPower International 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 VivoPower International PLC, you can compare the effects of market volatilities on Prudential Short and VivoPower International 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 VivoPower International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short and VivoPower International.

Diversification Opportunities for Prudential Short and VivoPower International

0.43

Correlation Coefficient

Prudential Short  VivoPower International

Very weak diversification

The 3 months correlation between Prudential and VivoPower is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and VivoPower International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VivoPower International 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 VivoPower International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VivoPower International has no effect on the direction of Prudential Short i.e., Prudential Short and VivoPower International go up and down completely randomly.

Pair Corralation between Prudential Short and VivoPower International

Assuming the 90 days horizon Prudential Short Duration is expected to under-perform the VivoPower International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Short Duration is 36.75 times less risky than VivoPower International. The mutual fund trades about -0.05 of its potential returns per unit of risk. The VivoPower International PLC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  116.00  in VivoPower International PLC on September 28, 2024 and sell it today you would earn a total of  25.00  from holding VivoPower International PLC or generate 21.55% return on investment over 90 days.

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

Prudential Short Duration  vs.  VivoPower International PLC

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.

VivoPower International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VivoPower International PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VivoPower International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Short and VivoPower International

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

The idea behind Prudential Short Duration and VivoPower International PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.