Correlation Between Prudential Government and Gmo High

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

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

Diversification Opportunities for Prudential Government and Gmo High

0.0

Correlation Coefficient

Prudential Government  Gmo High

Pay attention - limited upside

The 3 months correlation between Prudential and Gmo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Money and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield and Prudential Government 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 Government Money are associated (or correlated) with Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of Prudential Government i.e., Prudential Government and Gmo High go up and down completely randomly.

Pair Corralation between Prudential Government and Gmo High

If you would invest  1,784  in Gmo High Yield on September 13, 2024 and sell it today you would earn a total of  28.00  from holding Gmo High Yield or generate 1.57% return on investment over 90 days.

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

Prudential Government Money  vs.  Gmo High Yield

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo High Yield are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo High 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 Government and Gmo High

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

The idea behind Prudential Government Money and Gmo High Yield 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.