Correlation Between Prudential Government and Eaton Vance

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

Diversification Opportunities for Prudential Government and Eaton Vance

-0.51

Correlation Coefficient

Prudential Government  Eaton Vance

Excellent diversification

The 3 months correlation between Prudential and Eaton is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Eaton Vance Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Small 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Small has no effect on the direction of Prudential Government i.e., Prudential Government and Eaton Vance go up and down completely randomly.

Pair Corralation between Prudential Government and Eaton Vance

Assuming the 90 days horizon Prudential Government Income is expected to under-perform the Eaton Vance. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Government Income is 3.35 times less risky than Eaton Vance. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Eaton Vance Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,452  in Eaton Vance Small Cap on September 17, 2024 and sell it today you would earn a total of  65.00  from holding Eaton Vance Small Cap or generate 4.48% return on investment over 90 days.

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

Prudential Government Income  vs.  Eaton Vance Small Cap

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.

Eaton Vance Small

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Eaton Vance 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 Eaton Vance

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

The idea behind Prudential Government Income and Eaton Vance Small Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.