Correlation Between Global X and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Funds and Prudential Financial, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Prudential Financial.
Diversification Opportunities for Global X and Prudential Financial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Prudential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Global X 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 Global X Funds 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 Global X i.e., Global X and Prudential Financial go up and down completely randomly.
Pair Corralation between Global X and Prudential Financial
Assuming the 90 days trading horizon Global X is expected to generate 1.32 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, Global X Funds is 1.39 times less risky than Prudential Financial. It trades about 0.24 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 35,998 in Prudential Financial on September 1, 2024 and sell it today you would earn a total of 3,197 from holding Prudential Financial or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global X Funds vs. Prudential Financial
Performance |
| Timeline |
| Global X Funds |
| Prudential Financial |
Global X and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global X and Prudential Financial
The main advantage of trading using opposite Global X and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.| Global X vs. Taiwan Semiconductor Manufacturing | Global X vs. Alibaba Group Holding | Global X vs. Microsoft | Global X vs. Alphabet |
| Prudential Financial vs. Fras le SA | Prudential Financial vs. Western Digital | Prudential Financial vs. Energisa SA | Prudential Financial vs. Clave Indices De |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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