Correlation Between Prudential Total and Baird E

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

By analyzing existing cross correlation between Prudential Total Return and Baird E Plus, you can compare the effects of market volatilities on Prudential Total and Baird E 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 Total with a short position of Baird E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Total and Baird E.

Diversification Opportunities for Prudential Total and Baird E

0.83

Correlation Coefficient

Prudential Total  Baird E

Very poor diversification

The 3 months correlation between Prudential and Baird is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Total Return and Baird E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird E Plus and Prudential Total 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 Total Return are associated (or correlated) with Baird E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird E Plus has no effect on the direction of Prudential Total i.e., Prudential Total and Baird E go up and down completely randomly.

Pair Corralation between Prudential Total and Baird E

Assuming the 90 days horizon Prudential Total Return is expected to generate 1.03 times more return on investment than Baird E. However, Prudential Total is 1.03 times more volatile than Baird E Plus. It trades about 0.14 of its potential returns per unit of risk. Baird E Plus is currently generating about 0.1 per unit of risk. If you would invest  1,169  in Prudential Total Return on December 30, 2024 and sell it today you would earn a total of  31.00  from holding Prudential Total Return or generate 2.65% return on investment over 90 days.

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

Prudential Total Return  vs.  Baird E Plus

Prudential Total Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Total Return 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 Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baird E Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baird E Plus are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baird E 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 Total and Baird E

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

The idea behind Prudential Total Return and Baird E Plus 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.