Correlation Between Prudential Financial and United States

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

By analyzing existing cross correlation between Prudential Financial 4125 and United States Steel, you can compare the effects of market volatilities on Prudential Financial and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and United States.

Diversification Opportunities for Prudential Financial and United States

0.45

Correlation Coefficient

Prudential Financial  United States

Very weak diversification

The 3 months correlation between Prudential and United is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 4125 are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Prudential Financial i.e., Prudential Financial and United States go up and down completely randomly.

Pair Corralation between Prudential Financial and United States

Considering the 90-day investment horizon Prudential Financial 4125 is expected to generate 0.18 times more return on investment than United States. However, Prudential Financial 4125 is 5.6 times less risky than United States. It trades about -0.65 of its potential returns per unit of risk. United States Steel is currently generating about -0.37 per unit of risk. If you would invest  1,944  in Prudential Financial 4125 on October 1, 2024 and sell it today you would lose (153.00) from holding Prudential Financial 4125 or give up 7.87% of portfolio value over 90 days.

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

Prudential Financial 4125  vs.  United States Steel

Prudential Financial 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Prudential Financial and United States

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

The idea behind Prudential Financial 4125 and United States Steel 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.