Correlation Between Prudential Real and Columbia Pacificasia

Can any of the company-specific risk be diversified away by investing in both Prudential Real and Columbia Pacificasia 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 Columbia Pacificasia 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 Columbia Pacificasia Fund, you can compare the effects of market volatilities on Prudential Real and Columbia Pacificasia 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 Columbia Pacificasia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and Columbia Pacificasia.

Diversification Opportunities for Prudential Real and Columbia Pacificasia

0.83

Correlation Coefficient

Prudential Real  Columbia Pacificasia

Very poor diversification

The 3 months correlation between Prudential and Columbia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Columbia Pacificasia Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Pacificasia 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 Columbia Pacificasia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Pacificasia has no effect on the direction of Prudential Real i.e., Prudential Real and Columbia Pacificasia go up and down completely randomly.

Pair Corralation between Prudential Real and Columbia Pacificasia

Assuming the 90 days horizon Prudential Real Estate is expected to generate 0.58 times more return on investment than Columbia Pacificasia. However, Prudential Real Estate is 1.72 times less risky than Columbia Pacificasia. It trades about -0.2 of its potential returns per unit of risk. Columbia Pacificasia Fund is currently generating about -0.26 per unit of risk. If you would invest  1,605  in Prudential Real Estate on October 11, 2024 and sell it today you would lose (81.00) from holding Prudential Real Estate or give up 5.05% 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.  Columbia Pacificasia Fund

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 fairly strong basic indicators, Prudential Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Pacificasia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Pacificasia Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Prudential Real and Columbia Pacificasia

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

The idea behind Prudential Real Estate and Columbia Pacificasia Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.