Correlation Between Voya Real and Prudential Real

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

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

Diversification Opportunities for Voya Real and Prudential Real

0.84

Correlation Coefficient

Voya Real  Prudential Real

Very poor diversification

The 3 months correlation between Voya and Prudential is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Voya Real Estate and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate and Voya 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 Voya Real Estate are associated (or correlated) with Prudential Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of Voya Real i.e., Voya Real and Prudential Real go up and down completely randomly.

Pair Corralation between Voya Real and Prudential Real

Assuming the 90 days horizon Voya Real Estate is expected to under-perform the Prudential Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Voya Real Estate is 1.04 times less risky than Prudential Real. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Prudential Real Estate is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  1,624  in Prudential Real Estate on October 8, 2024 and sell it today you would lose (74.00) from holding Prudential Real Estate or give up 4.56% of portfolio value over 90 days.

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

Voya Real Estate  vs.  Prudential Real Estate

Voya Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Voya Real and Prudential Real

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

The idea behind Voya Real Estate and Prudential Real Estate 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 Valuation module to check real value of public entities based on technical and fundamental data.