Correlation Between American Equity and Prudential Financial

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

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

Diversification Opportunities for American Equity and Prudential Financial

0.25

Correlation Coefficient

American Equity  Prudential Financial

Modest diversification

The 3 months correlation between American and Prudential is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and American Equity 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 American Equity Investment are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of American Equity i.e., American Equity and Prudential Financial go up and down completely randomly.

Pair Corralation between American Equity and Prudential Financial

If you would invest  5,375  in American Equity Investment on September 21, 2024 and sell it today you would earn a total of  0.00  from holding American Equity Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

American Equity Investment  vs.  Prudential Financial

American Equity Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Equity Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Equity and Prudential Financial

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

The idea behind American Equity Investment and Prudential Financial 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.