Correlation Between Prudential Financial and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Ambev SA 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 Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Ambev SA, you can compare the effects of market volatilities on Prudential Financial and Ambev SA 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 Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Ambev SA.
Diversification Opportunities for Prudential Financial and Ambev SA
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and Ambev is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Prudential Financial i.e., Prudential Financial and Ambev SA go up and down completely randomly.
Pair Corralation between Prudential Financial and Ambev SA
Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.21 times more return on investment than Ambev SA. However, Prudential Financial is 4.67 times less risky than Ambev SA. It trades about 0.22 of its potential returns per unit of risk. Ambev SA is currently generating about -0.01 per unit of risk. If you would invest 198,872 in Prudential Financial on September 4, 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. Ambev SA
Performance |
| Timeline |
| Prudential Financial |
| Ambev SA |
Prudential Financial and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Ambev SA
The main advantage of trading using opposite Prudential Financial and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Ambev SA 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 Ambev SA will offset losses from the drop in Ambev SA's long position.| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. SPDR Series Trust | Prudential Financial vs. Vanguard World |
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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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