Correlation Between Pax Small and Prudential High
Can any of the company-specific risk be diversified away by investing in both Pax Small and Prudential 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 Pax Small and Prudential High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pax Small Cap and Prudential High Yield, you can compare the effects of market volatilities on Pax Small and Prudential 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 Pax Small with a short position of Prudential High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Small and Prudential High.
Diversification Opportunities for Pax Small and Prudential High
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pax and Prudential is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pax Small Cap and Prudential High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield and Pax Small 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 Pax Small Cap are associated (or correlated) with Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Pax Small i.e., Pax Small and Prudential High go up and down completely randomly.
Pair Corralation between Pax Small and Prudential High
Assuming the 90 days horizon Pax Small Cap is expected to generate 6.21 times more return on investment than Prudential High. However, Pax Small is 6.21 times more volatile than Prudential High Yield. It trades about 0.23 of its potential returns per unit of risk. Prudential High Yield is currently generating about 0.16 per unit of risk. If you would invest 1,683 in Pax Small Cap on September 8, 2024 and sell it today you would earn a total of 263.00 from holding Pax Small Cap or generate 15.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Pax Small Cap vs. Prudential High Yield
Performance |
Timeline |
Pax Small Cap |
Prudential High Yield |
Pax Small and Prudential High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pax Small and Prudential High
The main advantage of trading using opposite Pax Small and Prudential High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pax Small position performs unexpectedly, Prudential 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 Prudential High will offset losses from the drop in Prudential High's long position.Pax Small vs. Pax E Bond | Pax Small vs. Pax Global Environmental | Pax Small vs. Pax Esg Beta | Pax Small vs. Pax Global Opportunities |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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