Correlation Between Prudential Public and American Equity

Can any of the company-specific risk be diversified away by investing in both Prudential Public and American Equity 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 Public and American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Public Limited and American Equity Investment, you can compare the effects of market volatilities on Prudential Public and American Equity 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 Public with a short position of American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Public and American Equity.

Diversification Opportunities for Prudential Public and American Equity

-0.6

Correlation Coefficient

Prudential Public  American Equity

Excellent diversification

The 3 months correlation between Prudential and American is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Public Limited and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve and Prudential Public 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 Public Limited are associated (or correlated) with American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of Prudential Public i.e., Prudential Public and American Equity go up and down completely randomly.

Pair Corralation between Prudential Public and American Equity

Considering the 90-day investment horizon Prudential Public Limited is expected to under-perform the American Equity. In addition to that, Prudential Public is 1.04 times more volatile than American Equity Investment. It trades about -0.01 of its total potential returns per unit of risk. American Equity Investment is currently generating about 0.05 per unit of volatility. If you would invest  3,672  in American Equity Investment on February 6, 2024 and sell it today you would earn a total of  1,975  from holding American Equity Investment or generate 53.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Prudential Public Limited  vs.  American Equity Investment

Prudential Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

American Equity Inve

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Equity Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, American Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Prudential Public and American Equity

The main advantage of trading using opposite Prudential Public and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Public position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.

The idea behind Prudential Public Limited and American Equity Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.