Correlation Between Prudential Real and American Beacon
Can any of the company-specific risk be diversified away by investing in both Prudential Real and American Beacon 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 Real and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Real Estate and American Beacon Small, you can compare the effects of market volatilities on Prudential Real and American Beacon 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 Real with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and American Beacon.
Diversification Opportunities for Prudential Real and American Beacon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Prudential 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 Prudential Real Estate are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Small has no effect on the direction of Prudential Real i.e., Prudential Real and American Beacon go up and down completely randomly.
Pair Corralation between Prudential Real and American Beacon
Assuming the 90 days horizon Prudential Real Estate is expected to generate 0.64 times more return on investment than American Beacon. However, Prudential Real Estate is 1.55 times less risky than American Beacon. It trades about -0.26 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.4 per unit of risk. If you would invest 1,624 in Prudential Real Estate on October 10, 2024 and sell it today you would lose (106.00) from holding Prudential Real Estate or give up 6.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Prudential Real Estate vs. American Beacon Small
Performance |
Timeline |
Prudential Real Estate |
American Beacon Small |
Prudential Real and American Beacon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prudential Real and American Beacon
The main advantage of trading using opposite Prudential Real and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Real position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.Prudential Real vs. Goehring Rozencwajg Resources | Prudential Real vs. Salient Mlp Energy | Prudential Real vs. Hennessy Bp Energy | Prudential Real vs. Icon Natural Resources |
American Beacon vs. Prudential Real Estate | American Beacon vs. Neuberger Berman Real | American Beacon vs. Tiaa Cref Real Estate | American Beacon vs. Short Real Estate |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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