Correlation Between Prudential California and Ab All
Can any of the company-specific risk be diversified away by investing in both Prudential California and Ab All 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 California and Ab All into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential California Muni and Ab All Market, you can compare the effects of market volatilities on Prudential California and Ab All 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 California with a short position of Ab All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential California and Ab All.
Diversification Opportunities for Prudential California and Ab All
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and AMTOX is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Prudential California Muni and Ab All Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab All Market and Prudential California 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 California Muni are associated (or correlated) with Ab All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab All Market has no effect on the direction of Prudential California i.e., Prudential California and Ab All go up and down completely randomly.
Pair Corralation between Prudential California and Ab All
Assuming the 90 days horizon Prudential California is expected to generate 6.58 times less return on investment than Ab All. But when comparing it to its historical volatility, Prudential California Muni is 3.29 times less risky than Ab All. It trades about 0.04 of its potential returns per unit of risk. Ab All Market is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 900.00 in Ab All Market on November 19, 2024 and sell it today you would earn a total of 24.00 from holding Ab All Market or generate 2.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Prudential California Muni vs. Ab All Market
Performance |
Timeline |
Prudential California |
Ab All Market |
Prudential California and Ab All Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prudential California and Ab All
The main advantage of trading using opposite Prudential California and Ab All positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential California position performs unexpectedly, Ab All 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 Ab All will offset losses from the drop in Ab All's long position.The idea behind Prudential California Muni and Ab All Market 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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Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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