Correlation Between Prudential Government and Columbia Integrated

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

By analyzing existing cross correlation between Prudential Government Money and Columbia Integrated Large, you can compare the effects of market volatilities on Prudential Government and Columbia Integrated 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 Government with a short position of Columbia Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Columbia Integrated.

Diversification Opportunities for Prudential Government and Columbia Integrated

0.0

Correlation Coefficient

Prudential Government  Columbia Integrated

Pay attention - limited upside

The 3 months correlation between Prudential and Columbia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Columbia Integrated Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Integrated Large and Prudential Government 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 Government Money are associated (or correlated) with Columbia Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Integrated Large has no effect on the direction of Prudential Government i.e., Prudential Government and Columbia Integrated go up and down completely randomly.

Pair Corralation between Prudential Government and Columbia Integrated

Assuming the 90 days horizon Prudential Government is expected to generate 6.81 times less return on investment than Columbia Integrated. But when comparing it to its historical volatility, Prudential Government Money is 6.71 times less risky than Columbia Integrated. It trades about 0.11 of its potential returns per unit of risk. Columbia Integrated Large is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,672  in Columbia Integrated Large on September 12, 2024 and sell it today you would earn a total of  824.00  from holding Columbia Integrated Large or generate 49.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.6%
Values	Daily Returns

Prudential Government Money  vs.  Columbia Integrated Large

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Integrated Large

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Integrated Large are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Columbia Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Government and Columbia Integrated

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

The idea behind Prudential Government Money and Columbia Integrated Large 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.