Correlation Between Prudential Qma and Federated Mdt

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

By analyzing existing cross correlation between Prudential Qma Mid Cap and Federated Mdt Mid Cap, you can compare the effects of market volatilities on Prudential Qma and Federated Mdt 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 Qma with a short position of Federated Mdt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Qma and Federated Mdt.

Diversification Opportunities for Prudential Qma and Federated Mdt

0.88

Correlation Coefficient

Prudential Qma  Federated Mdt

Very poor diversification

The 3 months correlation between PRUDENTIAL and Federated is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Qma Mid Cap and Federated Mdt Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Mid and Prudential Qma 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 Qma Mid Cap are associated (or correlated) with Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Mid has no effect on the direction of Prudential Qma i.e., Prudential Qma and Federated Mdt go up and down completely randomly.

Pair Corralation between Prudential Qma and Federated Mdt

Assuming the 90 days horizon Prudential Qma is expected to generate 1.62 times less return on investment than Federated Mdt. But when comparing it to its historical volatility, Prudential Qma Mid Cap is 1.36 times less risky than Federated Mdt. It trades about 0.46 of its potential returns per unit of risk. Federated Mdt Mid Cap is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Federated Mdt Mid Cap on February 15, 2025 and sell it today you would earn a total of  440.00  from holding Federated Mdt Mid Cap or generate 19.73% return on investment over 90 days.

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

Prudential Qma Mid Cap  vs.  Federated Mdt Mid Cap

Prudential Qma Mid

Risk-Adjusted Performance

Very Weak

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

Federated Mdt Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mdt Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Federated Mdt 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 Qma and Federated Mdt

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

The idea behind Prudential Qma Mid Cap and Federated Mdt Mid Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..