Correlation Between Prudential Financial and Cairn Homes

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

By analyzing existing cross correlation between Prudential Financial and Cairn Homes PLC, you can compare the effects of market volatilities on Prudential Financial and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Cairn Homes.

Diversification Opportunities for Prudential Financial and Cairn Homes

-0.33

Correlation Coefficient

Prudential Financial  Cairn Homes

Very good diversification

The 3 months correlation between Prudential and Cairn is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Prudential Financial i.e., Prudential Financial and Cairn Homes go up and down completely randomly.

Pair Corralation between Prudential Financial and Cairn Homes

Assuming the 90 days trading horizon Prudential Financial is expected to under-perform the Cairn Homes. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial is 1.03 times less risky than Cairn Homes. The stock trades about -0.1 of its potential returns per unit of risk. The Cairn Homes PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,540  in Cairn Homes PLC on December 2, 2024 and sell it today you would earn a total of  220.00  from holding Cairn Homes PLC or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Prudential Financial  vs.  Cairn Homes PLC

Prudential Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cairn Homes PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cairn Homes is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prudential Financial and Cairn Homes

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

The idea behind Prudential Financial and Cairn Homes PLC 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.