Correlation Between Prudential Financial and Yellow Cake

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

By analyzing existing cross correlation between Prudential Financial and Yellow Cake PLC, you can compare the effects of market volatilities on Prudential Financial and Yellow Cake 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 Yellow Cake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Yellow Cake.

Diversification Opportunities for Prudential Financial and Yellow Cake

0.12

Correlation Coefficient

Prudential Financial  Yellow Cake

Average diversification

The 3 months correlation between Prudential and Yellow is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Yellow Cake PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Cake PLC 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 Yellow Cake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Cake PLC has no effect on the direction of Prudential Financial i.e., Prudential Financial and Yellow Cake go up and down completely randomly.

Pair Corralation between Prudential Financial and Yellow Cake

Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.83 times more return on investment than Yellow Cake. However, Prudential Financial is 1.2 times less risky than Yellow Cake. It trades about 0.04 of its potential returns per unit of risk. Yellow Cake PLC is currently generating about -0.03 per unit of risk. If you would invest  11,173  in Prudential Financial on September 15, 2024 and sell it today you would earn a total of  862.00  from holding Prudential Financial or generate 7.72% return on investment over 90 days.

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

Prudential Financial  vs.  Yellow Cake PLC

Prudential Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Yellow Cake PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Cake PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Yellow Cake is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prudential Financial and Yellow Cake

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

The idea behind Prudential Financial and Yellow Cake PLC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.