Correlation Between Prudential Floating and Stone Toro

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

By analyzing existing cross correlation between Prudential Floating Rate and Stone Toro Market, you can compare the effects of market volatilities on Prudential Floating and Stone Toro 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 Floating with a short position of Stone Toro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Floating and Stone Toro.

Diversification Opportunities for Prudential Floating and Stone Toro

-0.33

Correlation Coefficient

Prudential Floating  Stone Toro

Very good diversification

The 3 months correlation between Prudential and Stone is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Floating Rate and Stone Toro Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Toro Market and Prudential Floating 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 Floating Rate are associated (or correlated) with Stone Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Toro Market has no effect on the direction of Prudential Floating i.e., Prudential Floating and Stone Toro go up and down completely randomly.

Pair Corralation between Prudential Floating and Stone Toro

Assuming the 90 days horizon Prudential Floating Rate is expected to generate 0.59 times more return on investment than Stone Toro. However, Prudential Floating Rate is 1.69 times less risky than Stone Toro. It trades about 0.14 of its potential returns per unit of risk. Stone Toro Market is currently generating about -0.04 per unit of risk. If you would invest  903.00  in Prudential Floating Rate on November 28, 2024 and sell it today you would earn a total of  11.00  from holding Prudential Floating Rate or generate 1.22% return on investment over 90 days.

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

Prudential Floating Rate  vs.  Stone Toro Market

Prudential Floating Rate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Floating Rate are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Prudential Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stone Toro Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stone Toro Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Stone Toro 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 Floating and Stone Toro

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

The idea behind Prudential Floating Rate and Stone Toro 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.