Correlation Between Fidelity Sustainable and Prudential Financial

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

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

Diversification Opportunities for Fidelity Sustainable and Prudential Financial

-0.1

Correlation Coefficient

Fidelity Sustainable  Prudential Financial

Good diversification

The 3 months correlation between Fidelity and Prudential is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Fidelity Sustainable 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 Fidelity Sustainable USD 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 Fidelity Sustainable i.e., Fidelity Sustainable and Prudential Financial go up and down completely randomly.

Pair Corralation between Fidelity Sustainable and Prudential Financial

Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 2.37 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, Fidelity Sustainable USD is 3.61 times less risky than Prudential Financial. It trades about 0.08 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,932  in Prudential Financial on December 2, 2024 and sell it today you would earn a total of  2,519  from holding Prudential Financial or generate 28.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.93%
Values	Daily Returns

Fidelity Sustainable USD  vs.  Prudential Financial

Fidelity Sustainable USD

Risk-Adjusted Performance

Insignificant

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

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.

Pair Trading with Fidelity Sustainable and Prudential Financial

The main advantage of trading using opposite Fidelity Sustainable and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Sustainable 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 Fidelity Sustainable USD 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.