Correlation Between Prudential Real and Columbia Small

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

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

Diversification Opportunities for Prudential Real and Columbia Small

-0.34

Correlation Coefficient

Prudential Real  Columbia Small

Very good diversification

The 3 months correlation between Prudential and Columbia is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Columbia Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Small Cap and Prudential Real 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 Real Estate are associated (or correlated) with Columbia Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Small Cap has no effect on the direction of Prudential Real i.e., Prudential Real and Columbia Small go up and down completely randomly.

Pair Corralation between Prudential Real and Columbia Small

Assuming the 90 days horizon Prudential Real Estate is expected to under-perform the Columbia Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Real Estate is 1.89 times less risky than Columbia Small. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Columbia Small Cap is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,651  in Columbia Small Cap on September 14, 2024 and sell it today you would earn a total of  392.00  from holding Columbia Small Cap or generate 14.79% return on investment over 90 days.

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

Prudential Real Estate  vs.  Columbia Small Cap

Prudential Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Columbia Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Columbia Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Real and Columbia Small

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

The idea behind Prudential Real Estate and Columbia Small Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.