Correlation Between Prudential Financial and GMxico Transportes

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

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

Diversification Opportunities for Prudential Financial and GMxico Transportes

-0.25

Correlation Coefficient

Prudential Financial  GMxico Transportes

Very good diversification

The 3 months correlation between Prudential and GMxico is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB 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 GMxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Prudential Financial i.e., Prudential Financial and GMxico Transportes go up and down completely randomly.

Pair Corralation between Prudential Financial and GMxico Transportes

Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.06 times less return on investment than GMxico Transportes. But when comparing it to its historical volatility, Prudential Financial is 12.5 times less risky than GMxico Transportes. It trades about 0.13 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,188  in GMxico Transportes SAB on September 14, 2024 and sell it today you would earn a total of  2.00  from holding GMxico Transportes SAB or generate 0.06% return on investment over 90 days.

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

Prudential Financial  vs.  GMxico Transportes SAB

Prudential Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GMxico Transportes SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMxico Transportes SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GMxico Transportes 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 GMxico Transportes

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

The idea behind Prudential Financial and GMxico Transportes SAB 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.