Correlation Between Prudential Health and Oppenheimer International

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

Diversification Opportunities for Prudential Health and Oppenheimer International

0.75

Correlation Coefficient

Prudential Health  Oppenheimer International

Poor diversification

The 3 months correlation between Prudential and Oppenheimer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Oppenheimer International Dive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenheimer International 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 Oppenheimer International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenheimer International has no effect on the direction of Prudential Health i.e., Prudential Health and Oppenheimer International go up and down completely randomly.

Pair Corralation between Prudential Health and Oppenheimer International

Assuming the 90 days horizon Prudential Health Sciences is expected to generate 1.46 times more return on investment than Oppenheimer International. However, Prudential Health is 1.46 times more volatile than Oppenheimer International Diversified. It trades about 0.03 of its potential returns per unit of risk. Oppenheimer International Diversified is currently generating about -0.06 per unit of risk. If you would invest  3,935  in Prudential Health Sciences on September 20, 2024 and sell it today you would earn a total of  22.00  from holding Prudential Health Sciences or generate 0.56% return on investment over 90 days.

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

Prudential Health Sciences  vs.  Oppenheimer International Dive

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Oppenheimer International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oppenheimer International Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Prudential Health and Oppenheimer International

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

The idea behind Prudential Health Sciences and Oppenheimer International Diversified 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.