Correlation Between IShares Trust and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 IShares Trust and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Prudential Financial, you can compare the effects of market volatilities on IShares Trust 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 IShares Trust with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Prudential Financial.
Diversification Opportunities for IShares Trust and Prudential Financial
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Prudential is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Prudential Financial go up and down completely randomly.
Pair Corralation between IShares Trust and Prudential Financial
Assuming the 90 days trading horizon IShares Trust is expected to generate 3.08 times less return on investment than Prudential Financial. In addition to that, IShares Trust is 1.1 times more volatile than Prudential Financial. It trades about 0.01 of its total potential returns per unit of risk. Prudential Financial is currently generating about 0.02 per unit of volatility. If you would invest 180,843 in Prudential Financial on August 29, 2024 and sell it today you would earn a total of 20,657 from holding Prudential Financial or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. Prudential Financial
Performance |
| Timeline |
| iShares Trust |
| Prudential Financial |
IShares Trust and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Prudential Financial
The main advantage of trading using opposite IShares Trust and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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.| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
| Prudential Financial vs. The Select Sector | Prudential Financial vs. SPDR Series Trust | Prudential Financial vs. FibroGen | Prudential Financial vs. iShares Trust |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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