Correlation Between Ameriprise Financial and Prudential Financial

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

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

Diversification Opportunities for Ameriprise Financial and Prudential Financial

0.86

Correlation Coefficient

Ameriprise Financial  Prudential Financial

Very poor diversification

The 3 months correlation between Ameriprise and Prudential is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Ameriprise 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 Ameriprise Financial are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Prudential Financial go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Prudential Financial

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.93 times more return on investment than Prudential Financial. However, Ameriprise Financial is 1.07 times less risky than Prudential Financial. It trades about 0.32 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.17 per unit of risk. If you would invest  61,492  in Ameriprise Financial on September 15, 2024 and sell it today you would earn a total of  21,574  from holding Ameriprise Financial or generate 35.08% return on investment over 90 days.

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

Ameriprise Financial  vs.  Prudential Financial

Ameriprise Financial

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Ameriprise Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Prudential Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Prudential Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and Prudential Financial

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

The idea behind Ameriprise Financial and Prudential Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.