Correlation Between Prudential California and Intermediate-term
Can any of the company-specific risk be diversified away by investing in both Prudential California and Intermediate-term 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 California and Intermediate-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential California Muni and Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Prudential California and Intermediate-term 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 California with a short position of Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential California and Intermediate-term.
Diversification Opportunities for Prudential California and Intermediate-term
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Intermediate-term is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Prudential California Muni and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax and Prudential California 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 California Muni are associated (or correlated) with Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Prudential California i.e., Prudential California and Intermediate-term go up and down completely randomly.
Pair Corralation between Prudential California and Intermediate-term
Assuming the 90 days horizon Prudential California Muni is expected to generate 1.04 times more return on investment than Intermediate-term. However, Prudential California is 1.04 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.33 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.16 per unit of risk. If you would invest 972.00 in Prudential California Muni on April 16, 2025 and sell it today you would earn a total of 4.00 from holding Prudential California Muni or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential California Muni vs. Intermediate Term Tax Free Bon
Performance |
| Timeline |
| Prudential California |
| Intermediate Term Tax |
Prudential California and Intermediate-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential California and Intermediate-term
The main advantage of trading using opposite Prudential California and Intermediate-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential California position performs unexpectedly, Intermediate-term 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 Intermediate-term will offset losses from the drop in Intermediate-term's long position.| Prudential California vs. Dunham Focused Large | Prudential California vs. Dreyfus Large Cap | Prudential California vs. M Large Cap | Prudential California vs. Americafirst Large Cap |
| Intermediate-term vs. Lord Abbett Short | Intermediate-term vs. Prudential High Yield | Intermediate-term vs. Neuberger Berman Income | Intermediate-term vs. Janus High Yield Fund |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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