Correlation Between Prudential Plc and International Business
Can any of the company-specific risk be diversified away by investing in both Prudential Plc and International Business 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 Plc and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential plc and International Business Machines, you can compare the effects of market volatilities on Prudential Plc and International Business 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 Plc with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and International Business.
Diversification Opportunities for Prudential Plc and International Business
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prudential and International is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Prudential Plc 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 plc are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Prudential Plc i.e., Prudential Plc and International Business go up and down completely randomly.
Pair Corralation between Prudential Plc and International Business
Assuming the 90 days trading horizon Prudential plc is not expected to generate positive returns. However, Prudential plc is 262.5 times less risky than International Business. It waists most of its returns potential to compensate for thr risk taken. International Business is generating about 0.15 per unit of risk. If you would invest 229,170 in International Business Machines on September 12, 2024 and sell it today you would earn a total of 245,130 from holding International Business Machines or generate 106.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential plc vs. International Business Machine
Performance |
| Timeline |
| Prudential plc |
| International Business |
Prudential Plc and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Plc and International Business
The main advantage of trading using opposite Prudential Plc and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Plc position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Prudential Plc vs. The Select Sector | Prudential Plc vs. Promotora y Operadora | Prudential Plc vs. iShares Global Timber | Prudential Plc vs. SPDR Series Trust |
| International Business vs. Cognizant Technology Solutions | International Business vs. DXC Technology | International Business vs. The Select Sector | International Business vs. Promotora y Operadora |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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