Correlation Between Prudential High and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Prudential High and Basic Materials 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 High and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential High Yield and Basic Materials Fund, you can compare the effects of market volatilities on Prudential High and Basic Materials 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 High with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Basic Materials.
Diversification Opportunities for Prudential High and Basic Materials
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Basic is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Prudential High 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 High Yield are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Prudential High i.e., Prudential High and Basic Materials go up and down completely randomly.
Pair Corralation between Prudential High and Basic Materials
Assuming the 90 days horizon Prudential High is expected to generate 2.46 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Prudential High Yield is 4.08 times less risky than Basic Materials. It trades about 0.41 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 6,282 in Basic Materials Fund on April 20, 2025 and sell it today you would earn a total of 865.00 from holding Basic Materials Fund or generate 13.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. Basic Materials Fund
Performance |
| Timeline |
| Prudential High Yield |
| Basic Materials |
Prudential High and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Basic Materials
The main advantage of trading using opposite Prudential High and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Prudential High vs. Multimedia Portfolio Multimedia | Prudential High vs. L Mason Qs | Prudential High vs. The Tocqueville Fund | Prudential High vs. Balanced Fund Retail |
| Basic Materials vs. Enhanced Fixed Income | Basic Materials vs. Rbc Ultra Short Fixed | Basic Materials vs. Versatile Bond Portfolio | Basic Materials vs. Leader Short Term Bond |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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