Correlation Between Nasdaq 100 and Prudential Floating

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Prudential Floating 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 Nasdaq 100 and Prudential Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Prudential Floating Rate, you can compare the effects of market volatilities on Nasdaq 100 and Prudential Floating 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 Nasdaq 100 with a short position of Prudential Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Prudential Floating.

Diversification Opportunities for Nasdaq 100 and Prudential Floating

0.83

Correlation Coefficient

Nasdaq 100  Prudential Floating

Very poor diversification

The 3 months correlation between Nasdaq and Prudential is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Prudential Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Floating Rate and Nasdaq 100 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 Nasdaq 100 2x Strategy are associated (or correlated) with Prudential Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Floating Rate has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Prudential Floating go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Prudential Floating

Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 15.23 times more return on investment than Prudential Floating. However, Nasdaq 100 is 15.23 times more volatile than Prudential Floating Rate. It trades about 0.17 of its potential returns per unit of risk. Prudential Floating Rate is currently generating about 0.26 per unit of risk. If you would invest  36,986  in Nasdaq 100 2x Strategy on September 13, 2024 and sell it today you would earn a total of  8,026  from holding Nasdaq 100 2x Strategy or generate 21.7% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Prudential Floating Rate

Nasdaq 100 2x

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq 100 showed solid returns over the last few months and may actually be approaching a breakup point.

Prudential Floating Rate

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Floating Rate are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Prudential Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq 100 and Prudential Floating

The main advantage of trading using opposite Nasdaq 100 and Prudential Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Prudential Floating 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 Floating will offset losses from the drop in Prudential Floating's long position.

The idea behind Nasdaq 100 2x Strategy and Prudential Floating Rate 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.