Correlation Between Large-cap Growth and Prudential California

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

By analyzing existing cross correlation between Large Cap Growth Profund and Prudential California Muni, you can compare the effects of market volatilities on Large-cap Growth and Prudential California 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 Large-cap Growth with a short position of Prudential California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large-cap Growth and Prudential California.

Diversification Opportunities for Large-cap Growth and Prudential California

0.66

Correlation Coefficient

Large-cap Growth  Prudential California

Poor diversification

The 3 months correlation between Large-cap and Prudential is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Prudential California Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential California and Large-cap Growth 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 Large Cap Growth Profund are associated (or correlated) with Prudential California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential California has no effect on the direction of Large-cap Growth i.e., Large-cap Growth and Prudential California go up and down completely randomly.

Pair Corralation between Large-cap Growth and Prudential California

Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 7.48 times more return on investment than Prudential California. However, Large-cap Growth is 7.48 times more volatile than Prudential California Muni. It trades about 0.27 of its potential returns per unit of risk. Prudential California Muni is currently generating about 0.28 per unit of risk. If you would invest  4,543  in Large Cap Growth Profund on May 21, 2025 and sell it today you would earn a total of  591.00  from holding Large Cap Growth Profund or generate 13.01% return on investment over 90 days.

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

Large Cap Growth Profund  vs.  Prudential California Muni

Large Cap Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large-cap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Prudential California

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential California Muni are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Large-cap Growth and Prudential California

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

The idea behind Large Cap Growth Profund and Prudential California Muni 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.