Correlation Between Prudential Muni and Prudential Income

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

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

Diversification Opportunities for Prudential Muni and Prudential Income

0.08

Correlation Coefficient

Prudential Muni  Prudential Income

Significant diversification

The 3 months correlation between Prudential and Prudential is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Muni High and Prudential Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Income Builder and Prudential Muni 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 Muni High are associated (or correlated) with Prudential Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Income Builder has no effect on the direction of Prudential Muni i.e., Prudential Muni and Prudential Income go up and down completely randomly.

Pair Corralation between Prudential Muni and Prudential Income

Assuming the 90 days horizon Prudential Muni High is expected to under-perform the Prudential Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Muni High is 1.73 times less risky than Prudential Income. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Prudential Income Builder is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  957.00  in Prudential Income Builder on May 1, 2025 and sell it today you would earn a total of  55.00  from holding Prudential Income Builder or generate 5.75% return on investment over 90 days.

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

Prudential Muni High  vs.  Prudential Income Builder

Prudential Muni High

Risk-Adjusted Performance

Very Weak

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

Prudential Income Builder

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Income Builder are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Muni and Prudential Income

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

The idea behind Prudential Muni High and Prudential Income Builder 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.