Correlation Between Prudential Financial and Textron
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Textron 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 Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Textron, you can compare the effects of market volatilities on Prudential Financial and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Textron.
Diversification Opportunities for Prudential Financial and Textron
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prudential and Textron is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Prudential Financial i.e., Prudential Financial and Textron go up and down completely randomly.
Pair Corralation between Prudential Financial and Textron
Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.05 times more return on investment than Textron. However, Prudential Financial is 1.05 times more volatile than Textron. It trades about 0.14 of its potential returns per unit of risk. Textron is currently generating about 0.03 per unit of risk. If you would invest 198,872 in Prudential Financial on November 2, 2024 and sell it today you would earn a total of 45,128 from holding Prudential Financial or generate 22.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. Textron
Performance |
| Timeline |
| Prudential Financial |
| Textron |
Prudential Financial and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Textron
The main advantage of trading using opposite Prudential Financial and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| Prudential Financial vs. The Home Depot | Prudential Financial vs. Samsung Electronics Co | Prudential Financial vs. Taiwan Semiconductor Manufacturing | Prudential Financial vs. Grupo Sports World |
| Textron vs. The Boeing | Textron vs. Lockheed Martin | Textron vs. General Dynamics | Textron vs. The Walt Disney |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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