Correlation Between Abbey Capital and Prudential High

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

By analyzing existing cross correlation between Abbey Capital Multi and Prudential High Yield, you can compare the effects of market volatilities on Abbey Capital and Prudential High 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 Abbey Capital with a short position of Prudential High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbey Capital and Prudential High.

Diversification Opportunities for Abbey Capital and Prudential High

-0.46

Correlation Coefficient

Abbey Capital  Prudential High

Very good diversification

The 3 months correlation between Abbey and Prudential is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Abbey Capital Multi and Prudential High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield and Abbey Capital 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 Abbey Capital Multi are associated (or correlated) with Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Abbey Capital i.e., Abbey Capital and Prudential High go up and down completely randomly.

Pair Corralation between Abbey Capital and Prudential High

Assuming the 90 days horizon Abbey Capital Multi is expected to under-perform the Prudential High. In addition to that, Abbey Capital is 3.35 times more volatile than Prudential High Yield. It trades about -0.12 of its total potential returns per unit of risk. Prudential High Yield is currently generating about 0.13 per unit of volatility. If you would invest  469.00  in Prudential High Yield on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Prudential High Yield or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Abbey Capital Multi  vs.  Prudential High Yield

Abbey Capital Multi

Risk-Adjusted Performance

Very Weak

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

Prudential High Yield

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Abbey Capital and Prudential High

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

The idea behind Abbey Capital Multi and Prudential High Yield 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.