Correlation Between Vy Baron and Prudential Health

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

By analyzing existing cross correlation between Vy Baron Growth and Prudential Health Sciences, you can compare the effects of market volatilities on Vy Baron and Prudential Health 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 Vy Baron with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vy Baron and Prudential Health.

Diversification Opportunities for Vy Baron and Prudential Health

0.11

Correlation Coefficient

Vy Baron  Prudential Health

Average diversification

The 3 months correlation between IBSAX and Prudential is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Vy Baron Growth and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Vy Baron 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 Vy Baron Growth are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Vy Baron i.e., Vy Baron and Prudential Health go up and down completely randomly.

Pair Corralation between Vy Baron and Prudential Health

Assuming the 90 days horizon Vy Baron Growth is expected to under-perform the Prudential Health. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vy Baron Growth is 1.04 times less risky than Prudential Health. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Prudential Health Sciences is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,999  in Prudential Health Sciences on September 22, 2024 and sell it today you would lose (74.00) from holding Prudential Health Sciences or give up 1.85% of portfolio value over 90 days.

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

Vy Baron Growth  vs.  Prudential Health Sciences

Vy Baron Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vy Baron and Prudential Health

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

The idea behind Vy Baron Growth and Prudential Health Sciences 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.