Correlation Between Swan Defined and Prudential California

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

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

Diversification Opportunities for Swan Defined and Prudential California

0.15

Correlation Coefficient

Swan Defined  Prudential California

Average diversification

The 3 months correlation between Swan and Prudential is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Prudential California Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential California and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Prudential California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential California has no effect on the direction of Swan Defined i.e., Swan Defined and Prudential California go up and down completely randomly.

Pair Corralation between Swan Defined and Prudential California

If you would invest  966.00  in Prudential California Muni on May 1, 2025 and sell it today you would earn a total of  6.00  from holding Prudential California Muni or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Swan Defined Risk  vs.  Prudential California Muni

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

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

Prudential California

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential California Muni are ranked lower than 7 (%) 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.

Pair Trading with Swan Defined and Prudential California

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

The idea behind Swan Defined Risk and Prudential California 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.