Correlation Between Sapiens International and PRUDENTIAL

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

By analyzing existing cross correlation between Sapiens International and PRUDENTIAL FINL INC, you can compare the effects of market volatilities on Sapiens International and PRUDENTIAL 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 Sapiens International with a short position of PRUDENTIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapiens International and PRUDENTIAL.

Diversification Opportunities for Sapiens International and PRUDENTIAL

0.52

Correlation Coefficient

Sapiens International  PRUDENTIAL

Very weak diversification

The 3 months correlation between Sapiens and PRUDENTIAL is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and PRUDENTIAL FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRUDENTIAL FINL INC and Sapiens International 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 Sapiens International are associated (or correlated) with PRUDENTIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRUDENTIAL FINL INC has no effect on the direction of Sapiens International i.e., Sapiens International and PRUDENTIAL go up and down completely randomly.

Pair Corralation between Sapiens International and PRUDENTIAL

Given the investment horizon of 90 days Sapiens International is expected to generate 18.56 times less return on investment than PRUDENTIAL. But when comparing it to its historical volatility, Sapiens International is 22.45 times less risky than PRUDENTIAL. It trades about 0.05 of its potential returns per unit of risk. PRUDENTIAL FINL INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,291  in PRUDENTIAL FINL INC on September 13, 2024 and sell it today you would earn a total of  322.00  from holding PRUDENTIAL FINL INC or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.44%
Values	Daily Returns

Sapiens International  vs.  PRUDENTIAL FINL INC

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PRUDENTIAL FINL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRUDENTIAL FINL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PRUDENTIAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sapiens International and PRUDENTIAL

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

The idea behind Sapiens International and PRUDENTIAL FINL INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.