Correlation Between BIONTECH and Prudential Financial

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

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

Diversification Opportunities for BIONTECH and Prudential Financial

0.24

Correlation Coefficient

BIONTECH  Prudential Financial

Modest diversification

The 3 months correlation between BIONTECH and Prudential is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BIONTECH SE DRN and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and BIONTECH 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 BIONTECH SE DRN 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 BIONTECH i.e., BIONTECH and Prudential Financial go up and down completely randomly.

Pair Corralation between BIONTECH and Prudential Financial

Assuming the 90 days trading horizon BIONTECH SE DRN is expected to generate 2.29 times more return on investment than Prudential Financial. However, BIONTECH is 2.29 times more volatile than Prudential Financial. It trades about 0.16 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.15 per unit of risk. If you would invest  3,126  in BIONTECH SE DRN on September 4, 2024 and sell it today you would earn a total of  1,269  from holding BIONTECH SE DRN or generate 40.6% return on investment over 90 days.

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

BIONTECH SE DRN  vs.  Prudential Financial

BIONTECH SE DRN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BIONTECH SE DRN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIONTECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Prudential Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 11 (%) 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 BIONTECH and Prudential Financial

The main advantage of trading using opposite BIONTECH and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIONTECH 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 BIONTECH SE DRN 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.