Correlation Between Energy Basic and Prudential Short
Can any of the company-specific risk be diversified away by investing in both Energy Basic and Prudential Short 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 Energy Basic and Prudential Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and Prudential Short Duration, you can compare the effects of market volatilities on Energy Basic and Prudential Short 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 Energy Basic with a short position of Prudential Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Prudential Short.
Diversification Opportunities for Energy Basic and Prudential Short
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energy and Prudential is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Prudential Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Duration and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Prudential Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Duration has no effect on the direction of Energy Basic i.e., Energy Basic and Prudential Short go up and down completely randomly.
Pair Corralation between Energy Basic and Prudential Short
Assuming the 90 days horizon Energy Basic Materials is expected to generate 6.06 times more return on investment than Prudential Short. However, Energy Basic is 6.06 times more volatile than Prudential Short Duration. It trades about 0.16 of its potential returns per unit of risk. Prudential Short Duration is currently generating about 0.27 per unit of risk. If you would invest 1,242 in Energy Basic Materials on May 30, 2025 and sell it today you would earn a total of 112.00 from holding Energy Basic Materials or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Prudential Short Duration
Performance |
| Timeline |
| Energy Basic Materials |
| Prudential Short Duration |
Energy Basic and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Prudential Short
The main advantage of trading using opposite Energy Basic and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic position performs unexpectedly, Prudential Short 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 Short will offset losses from the drop in Prudential Short's long position.| Energy Basic vs. Multi Manager High Yield | Energy Basic vs. Jpmorgan High Yield | Energy Basic vs. Federated High Yield | Energy Basic vs. Pioneer High Yield |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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