Correlation Between Prudential Financial and American Equity

Can any of the company-specific risk be diversified away by investing in both Prudential Financial 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 Financial 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 Financial and American Equity Investment, you can compare the effects of market volatilities on Prudential Financial 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 Financial with a short position of American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and American Equity.

Diversification Opportunities for Prudential Financial and American Equity

-0.14

Correlation Coefficient

Prudential Financial  American Equity

Good diversification

The 3 months correlation between Prudential and American is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 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 Financial 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 Financial 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 Financial i.e., Prudential Financial and American Equity go up and down completely randomly.

Pair Corralation between Prudential Financial and American Equity

If you would invest  11,987  in Prudential Financial on September 30, 2024 and sell it today you would lose (81.00) from holding Prudential Financial or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Prudential Financial  vs.  American Equity Investment

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.

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.

Pair Trading with Prudential Financial and American Equity

The main advantage of trading using opposite Prudential Financial and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial 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 Financial 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.