Correlation Between Prudential Financial and Southern Company
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Southern Company 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 Southern Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial 4125 and Southern Company Series, you can compare the effects of market volatilities on Prudential Financial and Southern Company 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 Southern Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Southern Company.
Diversification Opportunities for Prudential Financial and Southern Company
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Southern is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company 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 4125 are associated (or correlated) with Southern Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Company has no effect on the direction of Prudential Financial i.e., Prudential Financial and Southern Company go up and down completely randomly.
Pair Corralation between Prudential Financial and Southern Company
Considering the 90-day investment horizon Prudential Financial is expected to generate 1.37 times less return on investment than Southern Company. In addition to that, Prudential Financial is 1.06 times more volatile than Southern Company Series. It trades about 0.02 of its total potential returns per unit of risk. Southern Company Series is currently generating about 0.04 per unit of volatility. If you would invest 1,774 in Southern Company Series on August 27, 2024 and sell it today you would earn a total of 238.00 from holding Southern Company Series or generate 13.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial 4125 vs. Southern Company Series
Performance |
| Timeline |
| Prudential Financial 4125 |
| Southern Company |
Prudential Financial and Southern Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Southern Company
The main advantage of trading using opposite Prudential Financial and Southern Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Southern Company 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 Southern Company will offset losses from the drop in Southern Company's long position.| Prudential Financial vs. Southern Company Series | Prudential Financial vs. Credit Enhanced Corts | Prudential Financial vs. Structured Products Corp | Prudential Financial vs. Affiliated Managers Group |
| Southern Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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