Correlation Between Cars and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Cars and Prudential Financial 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 Cars and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Prudential Financial, you can compare the effects of market volatilities on Cars and Prudential Financial 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 Cars with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Prudential Financial.
Diversification Opportunities for Cars and Prudential Financial
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cars and Prudential is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Cars 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 Cars Inc are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Cars i.e., Cars and Prudential Financial go up and down completely randomly.
Pair Corralation between Cars and Prudential Financial
Assuming the 90 days trading horizon Cars Inc is expected to generate 1.61 times more return on investment than Prudential Financial. However, Cars is 1.61 times more volatile than Prudential Financial. It trades about 0.32 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.12 per unit of risk. If you would invest 1,596 in Cars Inc on August 26, 2024 and sell it today you would earn a total of 307.00 from holding Cars Inc or generate 19.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Cars Inc vs. Prudential Financial
Performance |
| Timeline |
| Cars Inc |
| Prudential Financial |
Cars and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Prudential Financial
The main advantage of trading using opposite Cars and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Prudential Financial 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 Financial will offset losses from the drop in Prudential Financial's long position.| Cars vs. Samsung Electronics Co | Cars vs. Samsung Electronics Co | Cars vs. Hyundai Motor | Cars vs. Toyota Motor Corp |
| Prudential Financial vs. Cars Inc | Prudential Financial vs. JD Sports Fashion | Prudential Financial vs. United States Steel | Prudential Financial vs. PPHE Hotel Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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