Correlation Between Fabwx and Prudential Emerging

Can any of the company-specific risk be diversified away by investing in both Fabwx and Prudential 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 Fabwx and Prudential Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fabwx and Prudential Emerging Markets, you can compare the effects of market volatilities on Fabwx and Prudential 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 Fabwx with a short position of Prudential Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabwx and Prudential Emerging.

Diversification Opportunities for Fabwx and Prudential Emerging

0.89

Correlation Coefficient

Fabwx  Prudential Emerging

Very poor diversification

The 3 months correlation between Fabwx and Prudential is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fabwx and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging and Fabwx 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 Fabwx are associated (or correlated) with Prudential Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Emerging has no effect on the direction of Fabwx i.e., Fabwx and Prudential Emerging go up and down completely randomly.

Pair Corralation between Fabwx and Prudential Emerging

Assuming the 90 days horizon Fabwx is expected to generate 1.81 times more return on investment than Prudential Emerging. However, Fabwx is 1.81 times more volatile than Prudential Emerging Markets. It trades about 0.31 of its potential returns per unit of risk. Prudential Emerging Markets is currently generating about 0.12 per unit of risk. If you would invest  1,445  in Fabwx on May 5, 2025 and sell it today you would earn a total of  210.00  from holding Fabwx or generate 14.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fabwx  vs.  Prudential Emerging Markets

Fabwx

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fabwx are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fabwx showed solid returns over the last few months and may actually be approaching a breakup point.

Prudential Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Emerging Markets are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Fabwx and Prudential Emerging

The main advantage of trading using opposite Fabwx and Prudential Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabwx position performs unexpectedly, Prudential 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 Prudential Emerging will offset losses from the drop in Prudential Emerging's long position.

The idea behind Fabwx and Prudential Emerging Markets 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.