Correlation Between Prudential Health and Rivernorth/oaktree

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

Diversification Opportunities for Prudential Health and Rivernorth/oaktree

0.01

Correlation Coefficient

Prudential Health  Rivernorth/oaktree

Significant diversification

The 3 months correlation between Prudential and Rivernorth/oaktree is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Rivernorthoaktree High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivernorthoaktree High 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 Rivernorth/oaktree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivernorthoaktree High has no effect on the direction of Prudential Health i.e., Prudential Health and Rivernorth/oaktree go up and down completely randomly.

Pair Corralation between Prudential Health and Rivernorth/oaktree

Assuming the 90 days horizon Prudential Health Sciences is expected to under-perform the Rivernorth/oaktree. In addition to that, Prudential Health is 16.71 times more volatile than Rivernorthoaktree High Income. It trades about -0.14 of its total potential returns per unit of risk. Rivernorthoaktree High Income is currently generating about 0.2 per unit of volatility. If you would invest  872.00  in Rivernorthoaktree High Income on October 25, 2024 and sell it today you would earn a total of  13.00  from holding Rivernorthoaktree High Income or generate 1.49% 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.  Rivernorthoaktree High Income

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.

Rivernorthoaktree High

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rivernorthoaktree High Income are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rivernorth/oaktree 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 Rivernorth/oaktree

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

The idea behind Prudential Health Sciences and Rivernorthoaktree High Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.