Correlation Between MT Bank and Prudential Financial

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

By analyzing existing cross correlation between MT Bank Corp and Prudential Financial, you can compare the effects of market volatilities on MT Bank 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 MT Bank with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Prudential Financial.

Diversification Opportunities for MT Bank and Prudential Financial

0.59

Correlation Coefficient

MT Bank  Prudential Financial

Very weak diversification

The 3 months correlation between 0JW2 and Prudential is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and MT Bank 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 MT Bank Corp 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 MT Bank i.e., MT Bank and Prudential Financial go up and down completely randomly.

Pair Corralation between MT Bank and Prudential Financial

Assuming the 90 days trading horizon MT Bank Corp is expected to under-perform the Prudential Financial. But the stock apears to be less risky and, when comparing its historical volatility, MT Bank Corp is 1.11 times less risky than Prudential Financial. The stock trades about -0.17 of its potential returns per unit of risk. The Prudential Financial is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  12,616  in Prudential Financial on December 5, 2024 and sell it today you would lose (1,675) from holding Prudential Financial or give up 13.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

MT Bank Corp  vs.  Prudential Financial

MT Bank Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days MT Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Prudential Financial

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MT Bank and Prudential Financial

The main advantage of trading using opposite MT Bank and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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.

The idea behind MT Bank Corp and Prudential Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.