Correlation Between Prudential National and Pace International
Can any of the company-specific risk be diversified away by investing in both Prudential National and Pace International 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 National and Pace International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential National Muni and Pace International Emerging, you can compare the effects of market volatilities on Prudential National and Pace International 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 National with a short position of Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential National and Pace International.
Diversification Opportunities for Prudential National and Pace International
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Pace is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prudential National Muni and Pace International Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International and Prudential National 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 National Muni are associated (or correlated) with Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International has no effect on the direction of Prudential National i.e., Prudential National and Pace International go up and down completely randomly.
Pair Corralation between Prudential National and Pace International
Assuming the 90 days horizon Prudential National is expected to generate 15.63 times less return on investment than Pace International. But when comparing it to its historical volatility, Prudential National Muni is 6.38 times less risky than Pace International. It trades about 0.14 of its potential returns per unit of risk. Pace International Emerging is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,347 in Pace International Emerging on April 29, 2025 and sell it today you would earn a total of 198.00 from holding Pace International Emerging or generate 14.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential National Muni vs. Pace International Emerging
Performance |
| Timeline |
| Prudential National Muni |
| Pace International |
Prudential National and Pace International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential National and Pace International
The main advantage of trading using opposite Prudential National and Pace International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential National position performs unexpectedly, Pace International 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 Pace International will offset losses from the drop in Pace International's long position.| Prudential National vs. Franklin Government Money | Prudential National vs. Vanguard Money Market | Prudential National vs. Putnam Money Market | Prudential National vs. Principal Fds Money |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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