Correlation Between Prudential Financial and Amazon
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Amazon Inc, you can compare the effects of market volatilities on Prudential Financial and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Amazon.
Diversification Opportunities for Prudential Financial and Amazon
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Amazon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Prudential Financial i.e., Prudential Financial and Amazon go up and down completely randomly.
Pair Corralation between Prudential Financial and Amazon
Assuming the 90 days trading horizon Prudential Financial is expected to generate 15.3 times less return on investment than Amazon. But when comparing it to its historical volatility, Prudential Financial is 11.87 times less risky than Amazon. It trades about 0.13 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 349,900 in Amazon Inc on August 31, 2024 and sell it today you would earn a total of 73,329 from holding Amazon Inc or generate 20.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. Amazon Inc
Performance |
| Timeline |
| Prudential Financial |
| Amazon Inc |
Prudential Financial and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Amazon
The main advantage of trading using opposite Prudential Financial and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Prudential Financial vs. Monster Beverage Corp | Prudential Financial vs. Deutsche Bank Aktiengesellschaft | Prudential Financial vs. CVS Health | Prudential Financial vs. Ross Stores |
| Amazon vs. Samsung Electronics Co | Amazon vs. Martin Marietta Materials | Amazon vs. Taiwan Semiconductor Manufacturing | Amazon vs. United States Steel |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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