Correlation Between Prudential Short and Old Westbury

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

Diversification Opportunities for Prudential Short and Old Westbury

0.9

Correlation Coefficient

Prudential Short  Old Westbury

Almost no diversification

The 3 months correlation between Prudential and Old is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and Old Westbury Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Short 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Short has no effect on the direction of Prudential Short i.e., Prudential Short and Old Westbury go up and down completely randomly.

Pair Corralation between Prudential Short and Old Westbury

Assuming the 90 days horizon Prudential Short is expected to generate 2.48 times less return on investment than Old Westbury. In addition to that, Prudential Short is 1.65 times more volatile than Old Westbury Short Term. It trades about 0.13 of its total potential returns per unit of risk. Old Westbury Short Term is currently generating about 0.53 per unit of volatility. If you would invest  1,014  in Old Westbury Short Term on December 5, 2024 and sell it today you would earn a total of  9.00  from holding Old Westbury Short Term or generate 0.89% return on investment over 90 days.

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

Prudential Short Duration  vs.  Old Westbury Short Term

Prudential Short Duration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Short Duration are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. 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.

Old Westbury Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Short Term are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Old Westbury 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 Old Westbury

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

The idea behind Prudential Short Duration and Old Westbury Short Term 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.