Correlation Between Prudential Health and Collegeadvantage

Can any of the company-specific risk be diversified away by investing in both Prudential Health and Collegeadvantage 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 Collegeadvantage 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 Collegeadvantage 529 Savings, you can compare the effects of market volatilities on Prudential Health and Collegeadvantage 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 Collegeadvantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Collegeadvantage.

Diversification Opportunities for Prudential Health and Collegeadvantage

0.31

Correlation Coefficient

Prudential Health  Collegeadvantage

Weak diversification

The 3 months correlation between Prudential and Collegeadvantage is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Collegeadvantage 529 Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegeadvantage 529 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 Collegeadvantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collegeadvantage 529 has no effect on the direction of Prudential Health i.e., Prudential Health and Collegeadvantage go up and down completely randomly.

Pair Corralation between Prudential Health and Collegeadvantage

Assuming the 90 days horizon Prudential Health Sciences is expected to generate 1.4 times more return on investment than Collegeadvantage. However, Prudential Health is 1.4 times more volatile than Collegeadvantage 529 Savings. It trades about 0.0 of its potential returns per unit of risk. Collegeadvantage 529 Savings is currently generating about 0.0 per unit of risk. If you would invest  3,210  in Prudential Health Sciences on December 26, 2024 and sell it today you would lose (6.00) from holding Prudential Health Sciences or give up 0.19% of portfolio value over 90 days.

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

Prudential Health Sciences  vs.  Collegeadvantage 529 Savings

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 fairly strong basic indicators, Prudential Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Collegeadvantage 529

Risk-Adjusted Performance

Very Weak

Over the last 90 days Collegeadvantage 529 Savings has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Collegeadvantage 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 Collegeadvantage

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

The idea behind Prudential Health Sciences and Collegeadvantage 529 Savings 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.

Check out your portfolio center.

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.