Correlation Between Prudential Day and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both Prudential Day and Nasdaq 100 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 Day and Nasdaq 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Day One and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Prudential Day and Nasdaq 100 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 Day with a short position of Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Day and Nasdaq 100.

Diversification Opportunities for Prudential Day and Nasdaq 100

0.42

Correlation Coefficient

Prudential Day  Nasdaq 100

Very weak diversification

The 3 months correlation between Prudential and Nasdaq is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Day One and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x and Prudential Day 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 Day One are associated (or correlated) with Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Prudential Day i.e., Prudential Day and Nasdaq 100 go up and down completely randomly.

Pair Corralation between Prudential Day and Nasdaq 100

Assuming the 90 days horizon Prudential Day One is expected to under-perform the Nasdaq 100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Day One is 2.61 times less risky than Nasdaq 100. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Nasdaq 100 2x Strategy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  38,747  in Nasdaq 100 2x Strategy on September 27, 2024 and sell it today you would earn a total of  2,996  from holding Nasdaq 100 2x Strategy or generate 7.73% return on investment over 90 days.

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

Prudential Day One  vs.  Nasdaq 100 2x Strategy

Prudential Day One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Day One has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Nasdaq 100 2x

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq 100 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prudential Day and Nasdaq 100

The main advantage of trading using opposite Prudential Day and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Day position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.

The idea behind Prudential Day One and Nasdaq 100 2x Strategy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.