Correlation Between Prudential Utility and Prudential Global

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

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

Diversification Opportunities for Prudential Utility and Prudential Global

-0.32

Correlation Coefficient

Prudential Utility  Prudential Global

Very good diversification

The 3 months correlation between Prudential and Prudential is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Utility Fund and Prudential Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Global Real and Prudential Utility 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 Utility Fund are associated (or correlated) with Prudential Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Global Real has no effect on the direction of Prudential Utility i.e., Prudential Utility and Prudential Global go up and down completely randomly.

Pair Corralation between Prudential Utility and Prudential Global

Assuming the 90 days horizon Prudential Utility Fund is expected to generate 1.54 times more return on investment than Prudential Global. However, Prudential Utility is 1.54 times more volatile than Prudential Global Real. It trades about 0.07 of its potential returns per unit of risk. Prudential Global Real is currently generating about -0.13 per unit of risk. If you would invest  1,593  in Prudential Utility Fund on September 13, 2024 and sell it today you would earn a total of  70.00  from holding Prudential Utility Fund or generate 4.39% return on investment over 90 days.

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

Prudential Utility Fund  vs.  Prudential Global Real

Prudential Utility

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Utility Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Utility is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Global 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 Utility and Prudential Global

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

The idea behind Prudential Utility Fund and Prudential Global Real 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.