Correlation Between Prudential Financial and ArcelorMittal

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

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

Diversification Opportunities for Prudential Financial and ArcelorMittal

0.0

Correlation Coefficient

Prudential Financial  ArcelorMittal

Pay attention - limited upside

The 3 months correlation between Prudential and ArcelorMittal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Prudential Financial i.e., Prudential Financial and ArcelorMittal go up and down completely randomly.

Pair Corralation between Prudential Financial and ArcelorMittal

Considering the 90-day investment horizon Prudential Financial is expected to generate 0.26 times more return on investment than ArcelorMittal. However, Prudential Financial is 3.87 times less risky than ArcelorMittal. It trades about 0.01 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.01 per unit of risk. If you would invest  2,464  in Prudential Financial on September 5, 2024 and sell it today you would earn a total of  6.00  from holding Prudential Financial or generate 0.24% return on investment over 90 days.

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

Prudential Financial  vs.  ArcelorMittal SA ADR

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Financial and ArcelorMittal

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

The idea behind Prudential Financial and ArcelorMittal SA ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.