Correlation Between Prudential California and Small Pany

Can any of the company-specific risk be diversified away by investing in both Prudential California and Small Pany 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 Small Pany 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 Small Pany Value, you can compare the effects of market volatilities on Prudential California and Small Pany 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 Small Pany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential California and Small Pany.

Diversification Opportunities for Prudential California and Small Pany

0.66

Correlation Coefficient

Prudential California  Small Pany

Poor diversification

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

Pair Corralation between Prudential California and Small Pany

Assuming the 90 days horizon Prudential California is expected to generate 5.01 times less return on investment than Small Pany. But when comparing it to its historical volatility, Prudential California Muni is 11.28 times less risky than Small Pany. It trades about 0.25 of its potential returns per unit of risk. Small Pany Value is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,466  in Small Pany Value on May 27, 2025 and sell it today you would earn a total of  266.00  from holding Small Pany Value or generate 7.67% return on investment over 90 days.

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

Prudential California Muni  vs.  Small Pany Value

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 19 (%) 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.

Small Pany Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small Pany may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Prudential California and Small Pany

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

The idea behind Prudential California Muni and Small Pany Value 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..