Correlation Between Prudential Real and Growth Fund

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

By analyzing existing cross correlation between Prudential Real Estate and The Growth Fund, you can compare the effects of market volatilities on Prudential Real and Growth Fund 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 Real with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and Growth Fund.

Diversification Opportunities for Prudential Real and Growth Fund

-0.18

Correlation Coefficient

Prudential Real  Growth Fund

Good diversification

The 3 months correlation between Prudential and Growth is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and The Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund and Prudential Real 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 Real Estate are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of Prudential Real i.e., Prudential Real and Growth Fund go up and down completely randomly.

Pair Corralation between Prudential Real and Growth Fund

Assuming the 90 days horizon Prudential Real Estate is expected to under-perform the Growth Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Real Estate is 2.33 times less risky than Growth Fund. The mutual fund trades about -0.06 of its potential returns per unit of risk. The The Growth Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,168  in The Growth Fund on September 13, 2024 and sell it today you would earn a total of  119.00  from holding The Growth Fund or generate 2.3% return on investment over 90 days.

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

Prudential Real Estate  vs.  The Growth Fund

Prudential Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Growth Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Growth Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Growth Fund 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 Real and Growth Fund

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

The idea behind Prudential Real Estate and The Growth Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.