Correlation Between Prudential Core and Ultra Short-term

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

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

Diversification Opportunities for Prudential Core and Ultra Short-term

-0.28

Correlation Coefficient

Prudential Core  Ultra Short-term

Very good diversification

The 3 months correlation between Prudential and Ultra is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and Ultra Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Short Term and Prudential Core 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 Core Conservative are associated (or correlated) with Ultra Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Short Term has no effect on the direction of Prudential Core i.e., Prudential Core and Ultra Short-term go up and down completely randomly.

Pair Corralation between Prudential Core and Ultra Short-term

Assuming the 90 days horizon Prudential Core Conservative is expected to under-perform the Ultra Short-term. In addition to that, Prudential Core is 4.83 times more volatile than Ultra Short Term Bond. It trades about -0.49 of its total potential returns per unit of risk. Ultra Short Term Bond is currently generating about -0.1 per unit of volatility. If you would invest  1,009  in Ultra Short Term Bond on October 8, 2024 and sell it today you would lose (1.00) from holding Ultra Short Term Bond or give up 0.1% of portfolio value over 90 days.

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

Prudential Core Conservative  vs.  Ultra Short Term Bond

Prudential Core Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Core Conservative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultra Short Term

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Bond are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short-term 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 Core and Ultra Short-term

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

The idea behind Prudential Core Conservative and Ultra Short Term Bond 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.