Correlation Between Balanced Allocation and Prudential Absolute

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

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

Diversification Opportunities for Balanced Allocation and Prudential Absolute

-0.02

Correlation Coefficient

Balanced Allocation  Prudential Absolute

Good diversification

The 3 months correlation between Balanced and Prudential is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Allocation Fund and Prudential Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Absolute and Balanced Allocation 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 Balanced Allocation Fund are associated (or correlated) with Prudential Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Absolute has no effect on the direction of Balanced Allocation i.e., Balanced Allocation and Prudential Absolute go up and down completely randomly.

Pair Corralation between Balanced Allocation and Prudential Absolute

Assuming the 90 days horizon Balanced Allocation Fund is expected to under-perform the Prudential Absolute. In addition to that, Balanced Allocation is 7.59 times more volatile than Prudential Absolute Return. It trades about -0.06 of its total potential returns per unit of risk. Prudential Absolute Return is currently generating about 0.12 per unit of volatility. If you would invest  911.00  in Prudential Absolute Return on September 13, 2025 and sell it today you would earn a total of  6.00  from holding Prudential Absolute Return or generate 0.66% return on investment over 90 days.

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

Balanced Allocation Fund  vs.  Prudential Absolute Return

Balanced Allocation

Risk-Adjusted Performance

Weakest

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

Prudential Absolute

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Absolute Return 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 Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Allocation and Prudential Absolute

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

The idea behind Balanced Allocation Fund and Prudential Absolute Return 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.