Correlation Between Prudential Financial and BE Semiconductor

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

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

Diversification Opportunities for Prudential Financial and BE Semiconductor

-0.05

Correlation Coefficient

Prudential Financial  BE Semiconductor

Good diversification

The 3 months correlation between Prudential and 0XVE is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind and Prudential Financial 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 Financial are associated (or correlated) with BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of Prudential Financial i.e., Prudential Financial and BE Semiconductor go up and down completely randomly.

Pair Corralation between Prudential Financial and BE Semiconductor

Assuming the 90 days trading horizon Prudential Financial is expected to generate 3.71 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, Prudential Financial is 1.86 times less risky than BE Semiconductor. It trades about 0.04 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,247  in BE Semiconductor Industries on September 16, 2024 and sell it today you would earn a total of  1,521  from holding BE Semiconductor Industries or generate 13.52% return on investment over 90 days.

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

Prudential Financial  vs.  BE Semiconductor Industries

Prudential Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BE Semiconductor Ind

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Financial and BE Semiconductor

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

The idea behind Prudential Financial and BE Semiconductor Industries 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.