Correlation Between Prudential Government and Columbia Corporate

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

Diversification Opportunities for Prudential Government and Columbia Corporate

0.97

Correlation Coefficient

Prudential Government  Columbia Corporate

Almost no diversification

The 3 months correlation between Prudential and COLUMBIA is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Columbia Porate Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Porate Income 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 Columbia Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Porate Income has no effect on the direction of Prudential Government i.e., Prudential Government and Columbia Corporate go up and down completely randomly.

Pair Corralation between Prudential Government and Columbia Corporate

Assuming the 90 days horizon Prudential Government Income is expected to generate 1.14 times more return on investment than Columbia Corporate. However, Prudential Government is 1.14 times more volatile than Columbia Porate Income. It trades about 0.13 of its potential returns per unit of risk. Columbia Porate Income is currently generating about 0.08 per unit of risk. If you would invest  769.00  in Prudential Government Income on December 31, 2024 and sell it today you would earn a total of  20.00  from holding Prudential Government Income or generate 2.6% return on investment over 90 days.

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

Prudential Government Income  vs.  Columbia Porate Income

Prudential Government

Risk-Adjusted Performance

OK

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

Columbia Porate Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Porate Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Corporate 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 Columbia Corporate

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

The idea behind Prudential Government Income and Columbia Porate Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.