Correlation Between Prudential Real and Quantified Managed

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

Diversification Opportunities for Prudential Real and Quantified Managed

0.87

Correlation Coefficient

Prudential Real  Quantified Managed

Very poor diversification

The 3 months correlation between Prudential and Quantified is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Quantified Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantified Managed Income 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 Quantified Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantified Managed Income has no effect on the direction of Prudential Real i.e., Prudential Real and Quantified Managed go up and down completely randomly.

Pair Corralation between Prudential Real and Quantified Managed

Assuming the 90 days horizon Prudential Real Estate is expected to generate 1.95 times more return on investment than Quantified Managed. However, Prudential Real is 1.95 times more volatile than Quantified Managed Income. It trades about 0.25 of its potential returns per unit of risk. Quantified Managed Income is currently generating about 0.33 per unit of risk. If you would invest  734.00  in Prudential Real Estate on December 2, 2024 and sell it today you would earn a total of  19.00  from holding Prudential Real Estate or generate 2.59% return on investment over 90 days.

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

Prudential Real Estate  vs.  Quantified Managed Income

Prudential Real Estate

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Quantified Managed Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantified Managed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Quantified Managed 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 Quantified Managed

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

The idea behind Prudential Real Estate and Quantified Managed 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 Transaction History module to view history of all your transactions and understand their impact on performance.