Correlation Between Prudential Financial and Fidelity Advisor

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

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

Diversification Opportunities for Prudential Financial and Fidelity Advisor

1.0

Correlation Coefficient

Prudential Financial  Fidelity Advisor

No risk reduction

The 3 months correlation between PRUDENTIAL and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and Fidelity Advisor Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Fin and Prudential Financial 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 Financial Services are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Fin has no effect on the direction of Prudential Financial i.e., Prudential Financial and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Prudential Financial and Fidelity Advisor

Assuming the 90 days horizon Prudential Financial is expected to generate 1.18 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Prudential Financial Services is 1.11 times less risky than Fidelity Advisor. It trades about 0.19 of its potential returns per unit of risk. Fidelity Advisor Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,435  in Fidelity Advisor Financial on September 3, 2024 and sell it today you would earn a total of  606.00  from holding Fidelity Advisor Financial or generate 17.64% return on investment over 90 days.

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

Prudential Financial Services  vs.  Fidelity Advisor Financial

Prudential Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial Services are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Advisor Fin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Financial are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Fidelity Advisor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Financial and Fidelity Advisor

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

The idea behind Prudential Financial Services and Fidelity Advisor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.