Correlation Between Prudential Financial and Alaska Air
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Alaska Air 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 Alaska Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Alaska Air Group,, you can compare the effects of market volatilities on Prudential Financial and Alaska Air 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 Alaska Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Alaska Air.
Diversification Opportunities for Prudential Financial and Alaska Air
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Alaska is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Alaska Air Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group, 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group, has no effect on the direction of Prudential Financial i.e., Prudential Financial and Alaska Air go up and down completely randomly.
Pair Corralation between Prudential Financial and Alaska Air
Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.33 times less return on investment than Alaska Air. But when comparing it to its historical volatility, Prudential Financial is 1.09 times less risky than Alaska Air. It trades about 0.05 of its potential returns per unit of risk. Alaska Air Group, is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 20,700 in Alaska Air Group, on October 11, 2024 and sell it today you would earn a total of 19,400 from holding Alaska Air Group, or generate 93.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 70.82% |
| Values | Daily Returns |
Prudential Financial vs. Alaska Air Group,
Performance |
| Timeline |
| Prudential Financial |
| Alaska Air Group, |
Prudential Financial and Alaska Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Alaska Air
The main advantage of trading using opposite Prudential Financial and Alaska Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Alaska Air 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 Alaska Air will offset losses from the drop in Alaska Air's long position.| Prudential Financial vs. Jefferies Financial Group | Prudential Financial vs. Discover Financial Services | Prudential Financial vs. Global X Funds | Prudential Financial vs. Clover Health Investments, |
| Alaska Air vs. United Rentals | Alaska Air vs. Sumitomo Mitsui Financial | Alaska Air vs. salesforce inc | Alaska Air vs. Prudential Financial |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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