Correlation Between Prudential Government and Northern Fixed

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

Diversification Opportunities for Prudential Government and Northern Fixed

0.0

Correlation Coefficient

Prudential Government  Northern Fixed

Pay attention - limited upside

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

Pair Corralation between Prudential Government and Northern Fixed

Assuming the 90 days horizon Prudential Government is expected to generate 1.47 times less return on investment than Northern Fixed. But when comparing it to its historical volatility, Prudential Government Money is 3.3 times less risky than Northern Fixed. It trades about 0.1 of its potential returns per unit of risk. Northern Fixed Income is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  853.00  in Northern Fixed Income on October 25, 2024 and sell it today you would earn a total of  25.00  from holding Northern Fixed Income or generate 2.93% return on investment over 90 days.

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

Prudential Government Money  vs.  Northern Fixed Income

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.

Northern Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Northern Fixed 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 Government and Northern Fixed

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

The idea behind Prudential Government Money and Northern Fixed Income 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.