Correlation Between Prudential Real and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Prudential Real and Third Avenue 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 Third Avenue 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 Third Avenue Small Cap, you can compare the effects of market volatilities on Prudential Real and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Real and Third Avenue.
Diversification Opportunities for Prudential Real and Third Avenue
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Third is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Real Estate and Third Avenue Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Prudential Real i.e., Prudential Real and Third Avenue go up and down completely randomly.
Pair Corralation between Prudential Real and Third Avenue
Assuming the 90 days horizon Prudential Real is expected to generate 22.9 times less return on investment than Third Avenue. But when comparing it to its historical volatility, Prudential Real Estate is 1.19 times less risky than Third Avenue. It trades about 0.01 of its potential returns per unit of risk. Third Avenue Small Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,881 in Third Avenue Small Cap on April 17, 2025 and sell it today you would earn a total of 81.00 from holding Third Avenue Small Cap or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.5% |
| Values | Daily Returns |
Prudential Real Estate vs. Third Avenue Small Cap
Performance |
| Timeline |
| Prudential Real Estate |
| Third Avenue Small |
Prudential Real and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Real and Third Avenue
The main advantage of trading using opposite Prudential Real and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Real position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue's long position.| Prudential Real vs. Dreyfus Natural Resources | Prudential Real vs. Icon Natural Resources | Prudential Real vs. Hennessy Bp Energy | Prudential Real vs. Calvert Global Energy |
| Third Avenue vs. Third Avenue Value | Third Avenue vs. Third Avenue Real | Third Avenue vs. Muhlenkamp Fund Institutional | Third Avenue vs. Longleaf Partners Fund |
Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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