Correlation Between G2D Investments and Prudential Financial

Can any of the company-specific risk be diversified away by investing in both G2D Investments 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 G2D Investments and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and Prudential Financial, you can compare the effects of market volatilities on G2D Investments 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 G2D Investments with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and Prudential Financial.

Diversification Opportunities for G2D Investments and Prudential Financial

-0.46

Correlation Coefficient

G2D Investments  Prudential Financial

Very good diversification

The 3 months correlation between G2D and Prudential is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and G2D Investments 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 G2D Investments 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 G2D Investments i.e., G2D Investments and Prudential Financial go up and down completely randomly.

Pair Corralation between G2D Investments and Prudential Financial

Assuming the 90 days trading horizon G2D Investments is expected to generate 5.94 times less return on investment than Prudential Financial. In addition to that, G2D Investments is 1.92 times more volatile than Prudential Financial. It trades about 0.01 of its total potential returns per unit of risk. Prudential Financial is currently generating about 0.15 per unit of volatility. If you would invest  33,869  in Prudential Financial on September 2, 2024 and sell it today you would earn a total of  5,326  from holding Prudential Financial or generate 15.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

G2D Investments  vs.  Prudential Financial

G2D Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in G2D Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, G2D Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Prudential Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G2D Investments and Prudential Financial

The main advantage of trading using opposite G2D Investments and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments 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 G2D Investments 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.