Correlation Between Prudential Financial and Equity Income
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Prudential Financial and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Equity Income.
Diversification Opportunities for Prudential Financial and Equity Income
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Equity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Prudential Financial i.e., Prudential Financial and Equity Income go up and down completely randomly.
Pair Corralation between Prudential Financial and Equity Income
Assuming the 90 days horizon Prudential Financial Services is expected to generate 1.99 times more return on investment than Equity Income. However, Prudential Financial is 1.99 times more volatile than Equity Income Fund. It trades about 0.24 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.24 per unit of risk. If you would invest 2,290 in Prudential Financial Services on October 23, 2024 and sell it today you would earn a total of 114.00 from holding Prudential Financial Services or generate 4.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 94.74% |
Values | Daily Returns |
Prudential Financial Services vs. Equity Income Fund
Performance |
Timeline |
Prudential Financial |
Equity Income |
Prudential Financial and Equity Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Prudential Financial and Equity Income
The main advantage of trading using opposite Prudential Financial and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.Prudential Financial vs. Barings High Yield | Prudential Financial vs. Old Westbury Municipal | Prudential Financial vs. Federated High Yield | Prudential Financial vs. Transamerica Intermediate Muni |
Equity Income vs. Gmo Global Equity | Equity Income vs. Kinetics Global Fund | Equity Income vs. Vanguard Global Credit | Equity Income vs. Investec Global Franchise |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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