Correlation Between Prudential Financial and Federal Realty
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Federal Realty 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 Federal Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Federal Realty Investment, you can compare the effects of market volatilities on Prudential Financial and Federal Realty 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 Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Federal Realty.
Diversification Opportunities for Prudential Financial and Federal Realty
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Prudential and Federal is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 are associated (or correlated) with Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Prudential Financial i.e., Prudential Financial and Federal Realty go up and down completely randomly.
Pair Corralation between Prudential Financial and Federal Realty
Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.4 times more return on investment than Federal Realty. However, Prudential Financial is 1.4 times more volatile than Federal Realty Investment. It trades about 0.04 of its potential returns per unit of risk. Federal Realty Investment is currently generating about 0.03 per unit of risk. If you would invest 9,428 in Prudential Financial on September 4, 2024 and sell it today you would earn a total of 3,453 from holding Prudential Financial or generate 36.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.13% |
| Values | Daily Returns |
Prudential Financial vs. Federal Realty Investment
Performance |
| Timeline |
| Prudential Financial |
| Federal Realty Investment |
Prudential Financial and Federal Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Federal Realty
The main advantage of trading using opposite Prudential Financial and Federal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Federal Realty 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 Federal Realty will offset losses from the drop in Federal Realty's long position.| Prudential Financial vs. Samsung Electronics Co | Prudential Financial vs. Samsung Electronics Co | Prudential Financial vs. Hyundai Motor | Prudential Financial vs. Toyota Motor Corp |
| Federal Realty vs. Samsung Electronics Co | Federal Realty vs. Samsung Electronics Co | Federal Realty vs. Hyundai Motor | Federal Realty vs. Toyota Motor Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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