Correlation Between Prudential Financial and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Alibaba Group 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 Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Alibaba Group Holding, you can compare the effects of market volatilities on Prudential Financial and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Alibaba Group.
Diversification Opportunities for Prudential Financial and Alibaba Group
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and Alibaba is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Prudential Financial i.e., Prudential Financial and Alibaba Group go up and down completely randomly.
Pair Corralation between Prudential Financial and Alibaba Group
Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.95 times more return on investment than Alibaba Group. However, Prudential Financial is 1.06 times less risky than Alibaba Group. It trades about 0.13 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.04 per unit of risk. If you would invest 20,000 in Prudential Financial on August 31, 2024 and sell it today you would earn a total of 17,296 from holding Prudential Financial or generate 86.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 62.88% |
| Values | Daily Returns |
Prudential Financial vs. Alibaba Group Holding
Performance |
| Timeline |
| Prudential Financial |
| Alibaba Group Holding |
Prudential Financial and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Alibaba Group
The main advantage of trading using opposite Prudential Financial and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Prudential Financial vs. Fras le SA | Prudential Financial vs. Western Digital | Prudential Financial vs. Energisa SA | Prudential Financial vs. Clave Indices De |
| Alibaba Group vs. Metalrgica Riosulense SA | Alibaba Group vs. Take Two Interactive Software | Alibaba Group vs. METISA Metalrgica Timboense | Alibaba Group vs. The Trade Desk |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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