Correlation Between National Bank and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank of and Prudential Financial, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Prudential Financial.
Diversification Opportunities for National Bank and Prudential Financial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between National and Prudential is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and National Bank 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 National Bank of 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 National Bank i.e., National Bank and Prudential Financial go up and down completely randomly.
Pair Corralation between National Bank and Prudential Financial
Assuming the 90 days trading horizon National Bank is expected to generate 2.21 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, National Bank of is 1.22 times less risky than Prudential Financial. It trades about 0.03 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,106 in Prudential Financial on September 4, 2024 and sell it today you would earn a total of 3,775 from holding Prudential Financial or generate 41.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.96% |
| Values | Daily Returns |
National Bank of vs. Prudential Financial
Performance |
| Timeline |
| National Bank |
| Prudential Financial |
National Bank and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Prudential Financial
The main advantage of trading using opposite National Bank and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Batm Advanced Communications | National Bank vs. Aeorema Communications Plc | National Bank vs. Spirent Communications plc | National Bank vs. Lindsell Train Investment |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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