Correlation Between Prudential Health and Chestnut Street

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

By analyzing existing cross correlation between Prudential Health Sciences and Chestnut Street Exchange, you can compare the effects of market volatilities on Prudential Health and Chestnut Street 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 Health with a short position of Chestnut Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Chestnut Street.

Diversification Opportunities for Prudential Health and Chestnut Street

0.09

Correlation Coefficient

Prudential Health  Chestnut Street

Significant diversification

The 3 months correlation between Prudential and Chestnut is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Chestnut Street Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chestnut Street Exchange and Prudential Health 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 Health Sciences are associated (or correlated) with Chestnut Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chestnut Street Exchange has no effect on the direction of Prudential Health i.e., Prudential Health and Chestnut Street go up and down completely randomly.

Pair Corralation between Prudential Health and Chestnut Street

Assuming the 90 days horizon Prudential Health is expected to generate 11.64 times less return on investment than Chestnut Street. In addition to that, Prudential Health is 1.53 times more volatile than Chestnut Street Exchange. It trades about 0.0 of its total potential returns per unit of risk. Chestnut Street Exchange is currently generating about 0.07 per unit of volatility. If you would invest  88,531  in Chestnut Street Exchange on October 4, 2024 and sell it today you would earn a total of  24,041  from holding Chestnut Street Exchange or generate 27.16% return on investment over 90 days.

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

Prudential Health Sciences  vs.  Chestnut Street Exchange

Prudential Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Chestnut Street Exchange

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Chestnut Street 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 Health and Chestnut Street

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

The idea behind Prudential Health Sciences and Chestnut Street Exchange 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..