Correlation Between Prudential Emerging and Pimco Emerging

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Can any of the company-specific risk be diversified away by investing in both Prudential Emerging and Pimco Emerging 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 Emerging and Pimco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Emerging Markets and Pimco Emerging Local, you can compare the effects of market volatilities on Prudential Emerging and Pimco Emerging 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 Emerging with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Emerging and Pimco Emerging.

Diversification Opportunities for Prudential Emerging and Pimco Emerging

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Prudential and Pimco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PRUDENTIAL EMERGING MARKETS and PIMCO EMERGING LOCAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local and Prudential Emerging 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 Emerging Markets are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of Prudential Emerging i.e., Prudential Emerging and Pimco Emerging go up and down completely randomly.

Pair Corralation between Prudential Emerging and Pimco Emerging

Assuming the 90 days horizon Prudential Emerging Markets is expected to under-perform the Pimco Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Emerging Markets is 1.17 times less risky than Pimco Emerging. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Pimco Emerging Local is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Pimco Emerging Local on December 29, 2023 and sell it today you would earn a total of  3.00  from holding Pimco Emerging Local or generate 0.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

PRUDENTIAL EMERGING MARKETS  vs.  PIMCO EMERGING LOCAL

 Performance 
       Timeline  
Prudential Emerging 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Prudential Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Pimco Emerging Local 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Pimco Emerging Local has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pimco Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Emerging and Pimco Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prudential Emerging and Pimco Emerging

The main advantage of trading using opposite Prudential Emerging and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Emerging position performs unexpectedly, Pimco Emerging 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 Pimco Emerging will offset losses from the drop in Pimco Emerging's long position.
The idea behind Prudential Emerging Markets and Pimco Emerging Local 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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