Correlation Between Prudential Core and Vanguard Mid-cap

Can any of the company-specific risk be diversified away by investing in both Prudential Core and Vanguard Mid-cap 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 Vanguard Mid-cap 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 Vanguard Mid Cap Value, you can compare the effects of market volatilities on Prudential Core and Vanguard Mid-cap 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 Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Core and Vanguard Mid-cap.

Diversification Opportunities for Prudential Core and Vanguard Mid-cap

0.59

Correlation Coefficient

Prudential Core  Vanguard Mid-cap

Very weak diversification

The 3 months correlation between Prudential and Vanguard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Core Conservative and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap 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 Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Prudential Core i.e., Prudential Core and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Prudential Core and Vanguard Mid-cap

Assuming the 90 days horizon Prudential Core Conservative is expected to generate 0.41 times more return on investment than Vanguard Mid-cap. However, Prudential Core Conservative is 2.43 times less risky than Vanguard Mid-cap. It trades about 0.03 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about -0.1 per unit of risk. If you would invest  861.00  in Prudential Core Conservative on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Prudential Core Conservative or generate 0.58% return on investment over 90 days.

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

Prudential Core Conservative  vs.  Vanguard Mid Cap Value

Prudential Core Cons

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Core Conservative are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Mid-cap 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 Vanguard Mid-cap

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

The idea behind Prudential Core Conservative and Vanguard Mid Cap Value 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.