Correlation Between Prudential Real and Invesco Real

Can any of the company-specific risk be diversified away by investing in both Prudential Real and Invesco Real 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 Invesco Real 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 Invesco Real Estate, you can compare the effects of market volatilities on Prudential Real and Invesco Real 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 Invesco Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and Invesco Real.

Diversification Opportunities for Prudential Real and Invesco Real

0.74

Correlation Coefficient

Prudential Real  Invesco Real

Poor diversification

The 3 months correlation between Prudential and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Invesco Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Real Estate 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 Invesco Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Real Estate has no effect on the direction of Prudential Real i.e., Prudential Real and Invesco Real go up and down completely randomly.

Pair Corralation between Prudential Real and Invesco Real

Assuming the 90 days horizon Prudential Real Estate is expected to under-perform the Invesco Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Real Estate is 1.38 times less risky than Invesco Real. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Invesco Real Estate is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,850  in Invesco Real Estate on August 16, 2024 and sell it today you would lose (44.00) from holding Invesco Real Estate or give up 2.38% of portfolio value over 90 days.

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

Prudential Real Estate  vs.  Invesco Real Estate

Prudential Real Estate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Real Estate are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Real may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Invesco Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Real Estate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Real and Invesco Real

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

The idea behind Prudential Real Estate and Invesco Real Estate 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.