Correlation Between Prudential Short-term and Short Duration

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

By analyzing existing cross correlation between Prudential Short Term Porate and Short Duration Inflation, you can compare the effects of market volatilities on Prudential Short-term and Short Duration 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 Short-term with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short-term and Short Duration.

Diversification Opportunities for Prudential Short-term and Short Duration

0.7

Correlation Coefficient

Prudential Short-term  Short Duration

Poor diversification

The 3 months correlation between Prudential and Short is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Term Porate and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation and Prudential Short-term 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 Short Term Porate are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Prudential Short-term i.e., Prudential Short-term and Short Duration go up and down completely randomly.

Pair Corralation between Prudential Short-term and Short Duration

Assuming the 90 days horizon Prudential Short-term is expected to generate 1.68 times less return on investment than Short Duration. In addition to that, Prudential Short-term is 1.08 times more volatile than Short Duration Inflation. It trades about 0.21 of its total potential returns per unit of risk. Short Duration Inflation is currently generating about 0.39 per unit of volatility. If you would invest  1,028  in Short Duration Inflation on December 30, 2024 and sell it today you would earn a total of  33.00  from holding Short Duration Inflation or generate 3.21% return on investment over 90 days.

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

Prudential Short Term Porate  vs.  Short Duration Inflation

Prudential Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Short Term Porate are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Prudential Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Short Duration Inflation

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Inflation are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Duration 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 Short-term and Short Duration

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

The idea behind Prudential Short Term Porate and Short Duration Inflation 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 Global Correlations module to find global opportunities by holding instruments from different markets.