Correlation Between Prudential High and Mainstay Income

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

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

Diversification Opportunities for Prudential High and Mainstay Income

0.4

Correlation Coefficient

Prudential High  Mainstay Income

Very weak diversification

The 3 months correlation between Prudential and Mainstay is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Mainstay Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Income Builder and Prudential High 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 High Yield are associated (or correlated) with Mainstay Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Income Builder has no effect on the direction of Prudential High i.e., Prudential High and Mainstay Income go up and down completely randomly.

Pair Corralation between Prudential High and Mainstay Income

Assuming the 90 days horizon Prudential High Yield is expected to generate 0.36 times more return on investment than Mainstay Income. However, Prudential High Yield is 2.75 times less risky than Mainstay Income. It trades about 0.08 of its potential returns per unit of risk. Mainstay Income Builder is currently generating about -0.01 per unit of risk. If you would invest  481.00  in Prudential High Yield on September 14, 2024 and sell it today you would earn a total of  4.00  from holding Prudential High Yield or generate 0.83% return on investment over 90 days.

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

Prudential High Yield  vs.  Mainstay Income Builder

Prudential High Yield

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mainstay Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mainstay Income 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 High and Mainstay Income

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

The idea behind Prudential High Yield and Mainstay Income Builder 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.