Correlation Between United States and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both United States and Prudential Financial 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 United States and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Prudential Financial, you can compare the effects of market volatilities on United States and Prudential Financial 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 United States with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Prudential Financial.
Diversification Opportunities for United States and Prudential Financial
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Prudential is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and United States 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 United States Steel are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of United States i.e., United States and Prudential Financial go up and down completely randomly.
Pair Corralation between United States and Prudential Financial
Assuming the 90 days trading horizon United States Steel is expected to generate 5.14 times more return on investment than Prudential Financial. However, United States is 5.14 times more volatile than Prudential Financial. It trades about 0.14 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.06 per unit of risk. If you would invest 19,989 in United States Steel on November 1, 2024 and sell it today you would earn a total of 1,383 from holding United States Steel or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
United States Steel vs. Prudential Financial
Performance |
| Timeline |
| United States Steel |
| Prudential Financial |
United States and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Prudential Financial
The main advantage of trading using opposite United States and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Prudential Financial 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 Financial will offset losses from the drop in Prudential Financial's long position.| United States vs. Healthpeak Properties | United States vs. salesforce inc | United States vs. Ryanair Holdings plc | United States vs. Live Nation Entertainment, |
| Prudential Financial vs. United States Steel | Prudential Financial vs. United Airlines Holdings | Prudential Financial vs. salesforce inc | Prudential Financial vs. United Natural Foods, |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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