Correlation Between Prudential Financial and Ivy Advantus

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

Diversification Opportunities for Prudential Financial and Ivy Advantus

0.18

Correlation Coefficient

Prudential Financial  Ivy Advantus

Average diversification

The 3 months correlation between Prudential and Ivy is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and Ivy Advantus Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Advantus Bond 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 Ivy Advantus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Advantus Bond has no effect on the direction of Prudential Financial i.e., Prudential Financial and Ivy Advantus go up and down completely randomly.

Pair Corralation between Prudential Financial and Ivy Advantus

Assuming the 90 days horizon Prudential Financial Services is expected to generate 2.49 times more return on investment than Ivy Advantus. However, Prudential Financial is 2.49 times more volatile than Ivy Advantus Bond. It trades about 0.06 of its potential returns per unit of risk. Ivy Advantus Bond is currently generating about 0.03 per unit of risk. If you would invest  1,704  in Prudential Financial Services on October 11, 2024 and sell it today you would earn a total of  590.00  from holding Prudential Financial Services or generate 34.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.83%
Values	Daily Returns

Prudential Financial Services  vs.  Ivy Advantus Bond

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ivy Advantus Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential Financial and Ivy Advantus

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

The idea behind Prudential Financial Services and Ivy Advantus Bond 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.

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.