Correlation Between Prudential Health and Prudential Utility

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

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

Diversification Opportunities for Prudential Health and Prudential Utility

-0.69

Correlation Coefficient

Prudential Health  Prudential Utility

Excellent diversification

The 3 months correlation between Prudential and Prudential is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Prudential Utility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Utility and Prudential Health 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 Health Sciences are associated (or correlated) with Prudential Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Utility has no effect on the direction of Prudential Health i.e., Prudential Health and Prudential Utility go up and down completely randomly.

Pair Corralation between Prudential Health and Prudential Utility

Assuming the 90 days horizon Prudential Health Sciences is expected to under-perform the Prudential Utility. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Health Sciences is 1.25 times less risky than Prudential Utility. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Prudential Utility Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,552  in Prudential Utility Fund on September 5, 2024 and sell it today you would earn a total of  168.00  from holding Prudential Utility Fund or generate 10.82% return on investment over 90 days.

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

Prudential Health Sciences  vs.  Prudential Utility Fund

Prudential Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential Utility

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Utility Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Utility may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prudential Health and Prudential Utility

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

The idea behind Prudential Health Sciences and Prudential Utility Fund 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.