Correlation Between Multisector Bond and Prudential National

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

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

Diversification Opportunities for Multisector Bond and Prudential National

0.89

Correlation Coefficient

Multisector Bond  Prudential National

Very poor diversification

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

Pair Corralation between Multisector Bond and Prudential National

Assuming the 90 days horizon Multisector Bond Sma is expected to generate 2.97 times more return on investment than Prudential National. However, Multisector Bond is 2.97 times more volatile than Prudential National Muni. It trades about 0.24 of its potential returns per unit of risk. Prudential National Muni is currently generating about 0.21 per unit of risk. If you would invest  1,357  in Multisector Bond Sma on May 14, 2025 and sell it today you would earn a total of  57.00  from holding Multisector Bond Sma or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Multisector Bond Sma  vs.  Prudential National Muni

Multisector Bond Sma

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multisector Bond Sma are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multisector Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential National Muni

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential National Muni are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multisector Bond and Prudential National

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

The idea behind Multisector Bond Sma and Prudential National 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.