Correlation Between Prudential California and Multi-index 2040

Can any of the company-specific risk be diversified away by investing in both Prudential California and Multi-index 2040 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 California and Multi-index 2040 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential California Muni and Multi Index 2040 Lifetime, you can compare the effects of market volatilities on Prudential California and Multi-index 2040 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 California with a short position of Multi-index 2040. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential California and Multi-index 2040.

Diversification Opportunities for Prudential California and Multi-index 2040

0.74

Correlation Coefficient

Prudential California  Multi-index 2040

Poor diversification

The 3 months correlation between Prudential and Multi-index is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prudential California Muni and Multi Index 2040 Lifetime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Index 2040 and Prudential California 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 California Muni are associated (or correlated) with Multi-index 2040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Index 2040 has no effect on the direction of Prudential California i.e., Prudential California and Multi-index 2040 go up and down completely randomly.

Pair Corralation between Prudential California and Multi-index 2040

Assuming the 90 days horizon Prudential California is expected to generate 4.25 times less return on investment than Multi-index 2040. But when comparing it to its historical volatility, Prudential California Muni is 5.21 times less risky than Multi-index 2040. It trades about 0.24 of its potential returns per unit of risk. Multi Index 2040 Lifetime is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,415  in Multi Index 2040 Lifetime on May 14, 2025 and sell it today you would earn a total of  90.00  from holding Multi Index 2040 Lifetime or generate 6.36% return on investment over 90 days.

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

Prudential California Muni  vs.  Multi Index 2040 Lifetime

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 18 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Multi Index 2040

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Index 2040 Lifetime are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multi-index 2040 may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Prudential California and Multi-index 2040

The main advantage of trading using opposite Prudential California and Multi-index 2040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential California position performs unexpectedly, Multi-index 2040 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 Multi-index 2040 will offset losses from the drop in Multi-index 2040's long position.

The idea behind Prudential California Muni and Multi Index 2040 Lifetime 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.