Correlation Between Prudential Financial and Prudential Global

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

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

Diversification Opportunities for Prudential Financial and Prudential Global

-0.66

Correlation Coefficient

Prudential Financial  Prudential Global

Excellent diversification

The 3 months correlation between Prudential and Prudential is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and Prudential Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Global Real 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 Services are associated (or correlated) with Prudential Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Global Real has no effect on the direction of Prudential Financial i.e., Prudential Financial and Prudential Global go up and down completely randomly.

Pair Corralation between Prudential Financial and Prudential Global

Assuming the 90 days horizon Prudential Financial Services is expected to generate 1.64 times more return on investment than Prudential Global. However, Prudential Financial is 1.64 times more volatile than Prudential Global Real. It trades about 0.16 of its potential returns per unit of risk. Prudential Global Real is currently generating about -0.13 per unit of risk. If you would invest  2,281  in Prudential Financial Services on September 13, 2024 and sell it today you would earn a total of  278.00  from holding Prudential Financial Services or generate 12.19% return on investment over 90 days.

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

Prudential Financial Services  vs.  Prudential Global Real

Prudential Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial Services 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 Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Global 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 Financial and Prudential Global

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

The idea behind Prudential Financial Services and Prudential Global Real 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.