Correlation Between Prudential Qma and Catalyst/millburn

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

By analyzing existing cross correlation between Prudential Qma Strategic and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Prudential Qma and Catalyst/millburn 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 Catalyst/millburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Qma and Catalyst/millburn.

Diversification Opportunities for Prudential Qma and Catalyst/millburn

0.59

Correlation Coefficient

Prudential Qma  Catalyst/millburn

Very weak diversification

The 3 months correlation between Prudential and Catalyst/millburn is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Qma Strategic and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge 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 Strategic are associated (or correlated) with Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Prudential Qma i.e., Prudential Qma and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Prudential Qma and Catalyst/millburn

Assuming the 90 days horizon Prudential Qma Strategic is expected to under-perform the Catalyst/millburn. In addition to that, Prudential Qma is 3.34 times more volatile than Catalystmillburn Hedge Strategy. It trades about -0.12 of its total potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.05 per unit of volatility. If you would invest  3,846  in Catalystmillburn Hedge Strategy on October 10, 2024 and sell it today you would earn a total of  74.00  from holding Catalystmillburn Hedge Strategy or generate 1.92% return on investment over 90 days.

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

Prudential Qma Strategic  vs.  Catalystmillburn Hedge Strateg

Prudential Qma Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Qma Strategic has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Catalystmillburn Hedge

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Catalyst/millburn 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 Qma and Catalyst/millburn

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

The idea behind Prudential Qma Strategic and Catalystmillburn Hedge Strategy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.