Correlation Between Prudential Qma and Ab Large

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

By analyzing existing cross correlation between Prudential Qma Large Cap and Ab Large Cap, you can compare the effects of market volatilities on Prudential Qma and Ab Large 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 Qma with a short position of Ab Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Qma and Ab Large.

Diversification Opportunities for Prudential Qma and Ab Large

0.88

Correlation Coefficient

Prudential Qma  Ab Large

Very poor diversification

The 3 months correlation between Prudential and ALCKX is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Qma Large Cap and Ab Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Large Cap and Prudential Qma 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 Qma Large Cap are associated (or correlated) with Ab Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Large Cap has no effect on the direction of Prudential Qma i.e., Prudential Qma and Ab Large go up and down completely randomly.

Pair Corralation between Prudential Qma and Ab Large

Assuming the 90 days horizon Prudential Qma Large Cap is expected to generate 0.77 times more return on investment than Ab Large. However, Prudential Qma Large Cap is 1.29 times less risky than Ab Large. It trades about -0.1 of its potential returns per unit of risk. Ab Large Cap is currently generating about -0.1 per unit of risk. If you would invest  2,228  in Prudential Qma Large Cap on December 22, 2024 and sell it today you would lose (139.00) from holding Prudential Qma Large Cap or give up 6.24% of portfolio value over 90 days.

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

Prudential Qma Large Cap  vs.  Ab Large Cap

Prudential Qma Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Qma Large Cap 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.

Ab Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Prudential Qma and Ab Large

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

The idea behind Prudential Qma Large Cap and Ab Large Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..