Correlation Between Prudential Financial and Xiaomi
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Xiaomi 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 Xiaomi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Xiaomi, you can compare the effects of market volatilities on Prudential Financial and Xiaomi 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 Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Xiaomi.
Diversification Opportunities for Prudential Financial and Xiaomi
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Xiaomi is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Prudential Financial i.e., Prudential Financial and Xiaomi go up and down completely randomly.
Pair Corralation between Prudential Financial and Xiaomi
Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.1 times more return on investment than Xiaomi. However, Prudential Financial is 10.48 times less risky than Xiaomi. It trades about 0.22 of its potential returns per unit of risk. Xiaomi is currently generating about -0.02 per unit of risk. If you would invest 198,872 in Prudential Financial on September 12, 2024 and sell it today you would earn a total of 2,628 from holding Prudential Financial or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Financial vs. Xiaomi
Performance |
| Timeline |
| Prudential Financial |
| Xiaomi |
Prudential Financial and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Xiaomi
The main advantage of trading using opposite Prudential Financial and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Xiaomi 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 Xiaomi will offset losses from the drop in Xiaomi's long position.| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. iShares Global Timber | Prudential Financial vs. SPDR Series Trust |
| Xiaomi vs. Prudential Financial | Xiaomi vs. First Republic Bank | Xiaomi vs. Hoteles City Express | Xiaomi vs. McEwen Mining |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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