Correlation Between Auto Trader and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Prudential Financial, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Prudential Financial.
Diversification Opportunities for Auto Trader and Prudential Financial
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Auto and Prudential is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Prudential Financial go up and down completely randomly.
Pair Corralation between Auto Trader and Prudential Financial
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Prudential Financial. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.66 times less risky than Prudential Financial. The stock trades about -0.37 of its potential returns per unit of risk. The Prudential Financial is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 12,118 in Prudential Financial on October 13, 2024 and sell it today you would lose (580.00) from holding Prudential Financial or give up 4.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Prudential Financial
Performance |
| Timeline |
| Auto Trader Group |
| Prudential Financial |
Auto Trader and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Prudential Financial
The main advantage of trading using opposite Auto Trader and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Metals Exploration Plc | Auto Trader vs. Wyndham Hotels Resorts | Auto Trader vs. McEwen Mining | Auto Trader vs. CNH Industrial NV |
| Prudential Financial vs. Oakley Capital Investments | Prudential Financial vs. Panther Metals PLC | Prudential Financial vs. Tavistock Investments Plc | Prudential Financial vs. Cizzle Biotechnology Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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