Correlation Between Prudential Health and Target 2005

Can any of the company-specific risk be diversified away by investing in both Prudential Health and Target 2005 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 Target 2005 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 Target 2005 Fund, you can compare the effects of market volatilities on Prudential Health and Target 2005 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 Target 2005. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Target 2005.

Diversification Opportunities for Prudential Health and Target 2005

0.19

Correlation Coefficient

Prudential Health  Target 2005

Average diversification

The 3 months correlation between Prudential and Target is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Target 2005 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 2005 Fund 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 Target 2005. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target 2005 Fund has no effect on the direction of Prudential Health i.e., Prudential Health and Target 2005 go up and down completely randomly.

Pair Corralation between Prudential Health and Target 2005

Assuming the 90 days horizon Prudential Health Sciences is expected to under-perform the Target 2005. In addition to that, Prudential Health is 2.55 times more volatile than Target 2005 Fund. It trades about -0.14 of its total potential returns per unit of risk. Target 2005 Fund is currently generating about 0.02 per unit of volatility. If you would invest  1,141  in Target 2005 Fund on December 1, 2024 and sell it today you would earn a total of  7.00  from holding Target 2005 Fund or generate 0.61% 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.  Target 2005 Fund

Prudential Health

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Target 2005 Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target 2005 Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Target 2005 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 Target 2005

The main advantage of trading using opposite Prudential Health and Target 2005 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Health position performs unexpectedly, Target 2005 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 Target 2005 will offset losses from the drop in Target 2005's long position.

The idea behind Prudential Health Sciences and Target 2005 Fund 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.