Correlation Between Prudential Government and Dreyfus New

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

By analyzing existing cross correlation between Prudential Government Income and Dreyfus New York, you can compare the effects of market volatilities on Prudential Government and Dreyfus New 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 Dreyfus New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Dreyfus New.

Diversification Opportunities for Prudential Government and Dreyfus New

0.6

Correlation Coefficient

Prudential Government  Dreyfus New

Poor diversification

The 3 months correlation between Prudential and Dreyfus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Dreyfus New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus New York 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 Income are associated (or correlated) with Dreyfus New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus New York has no effect on the direction of Prudential Government i.e., Prudential Government and Dreyfus New go up and down completely randomly.

Pair Corralation between Prudential Government and Dreyfus New

Assuming the 90 days horizon Prudential Government is expected to generate 1.41 times less return on investment than Dreyfus New. In addition to that, Prudential Government is 1.84 times more volatile than Dreyfus New York. It trades about 0.03 of its total potential returns per unit of risk. Dreyfus New York is currently generating about 0.07 per unit of volatility. If you would invest  1,258  in Dreyfus New York on September 24, 2024 and sell it today you would earn a total of  99.00  from holding Dreyfus New York or generate 7.87% return on investment over 90 days.

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

Prudential Government Income  vs.  Dreyfus New York

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Government Income 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.

Dreyfus New York

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dreyfus New 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 Dreyfus New

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

The idea behind Prudential Government Income and Dreyfus New York 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.