Correlation Between Tax-managed and Prudential Commodity

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

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

Diversification Opportunities for Tax-managed and Prudential Commodity

-0.17

Correlation Coefficient

Tax-managed  Prudential Commodity

Good diversification

The 3 months correlation between Tax-managed and Prudential is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Prudential Commodity Strategie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Commodity and Tax-managed 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 Tax Managed Large Cap are associated (or correlated) with Prudential Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Commodity has no effect on the direction of Tax-managed i.e., Tax-managed and Prudential Commodity go up and down completely randomly.

Pair Corralation between Tax-managed and Prudential Commodity

Assuming the 90 days horizon Tax-managed is expected to generate 1.7 times less return on investment than Prudential Commodity. In addition to that, Tax-managed is 1.0 times more volatile than Prudential Commodity Strategies. It trades about 0.06 of its total potential returns per unit of risk. Prudential Commodity Strategies is currently generating about 0.1 per unit of volatility. If you would invest  664.00  in Prudential Commodity Strategies on October 23, 2024 and sell it today you would earn a total of  31.00  from holding Prudential Commodity Strategies or generate 4.67% return on investment over 90 days.

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

Tax Managed Large Cap  vs.  Prudential Commodity Strategie

Tax Managed Large

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Commodity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Commodity Strategies are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Prudential Commodity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax-managed and Prudential Commodity

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

The idea behind Tax Managed Large Cap and Prudential Commodity Strategies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.