Correlation Between Prudential Health and Multimanager Lifestyle

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

By analyzing existing cross correlation between Prudential Health Sciences and Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on Prudential Health and Multimanager Lifestyle 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 Health with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Multimanager Lifestyle.

Diversification Opportunities for Prudential Health and Multimanager Lifestyle

0.69

Correlation Coefficient

Prudential Health  Multimanager Lifestyle

Poor diversification

The 3 months correlation between Prudential and Multimanager is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Prudential Health 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 Health Sciences are associated (or correlated) with Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Prudential Health i.e., Prudential Health and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Prudential Health and Multimanager Lifestyle

Assuming the 90 days horizon Prudential Health is expected to generate 2.46 times less return on investment than Multimanager Lifestyle. In addition to that, Prudential Health is 1.8 times more volatile than Multimanager Lifestyle Aggressive. It trades about 0.04 of its total potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about 0.17 per unit of volatility. If you would invest  1,492  in Multimanager Lifestyle Aggressive on May 16, 2025 and sell it today you would earn a total of  91.00  from holding Multimanager Lifestyle Aggressive or generate 6.1% return on investment over 90 days.

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

Prudential Health Sciences  vs.  Multimanager Lifestyle Aggress

Prudential Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Health Sciences are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multimanager Lifestyle

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Aggressive are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multimanager Lifestyle 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 Health and Multimanager Lifestyle

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

The idea behind Prudential Health Sciences and Multimanager Lifestyle Aggressive 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.