Correlation Between Columbia Real and Prudential Real

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

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

Diversification Opportunities for Columbia Real and Prudential Real

0.97

Correlation Coefficient

Columbia Real  Prudential Real

Almost no diversification

The 3 months correlation between Columbia and Prudential is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Real Estate and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate and Columbia Real 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 Columbia Real Estate are associated (or correlated) with Prudential Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of Columbia Real i.e., Columbia Real and Prudential Real go up and down completely randomly.

Pair Corralation between Columbia Real and Prudential Real

Assuming the 90 days horizon Columbia Real Estate is expected to generate 1.16 times more return on investment than Prudential Real. However, Columbia Real is 1.16 times more volatile than Prudential Real Estate. It trades about 0.02 of its potential returns per unit of risk. Prudential Real Estate is currently generating about -0.01 per unit of risk. If you would invest  982.00  in Columbia Real Estate on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Columbia Real Estate or generate 0.2% return on investment over 90 days.

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

Columbia Real Estate  vs.  Prudential Real Estate

Columbia Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Columbia Real and Prudential Real

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

The idea behind Columbia Real Estate and Prudential Real Estate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.