Correlation Between Alcoa Corp and Prudential Financial

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

By analyzing existing cross correlation between Alcoa Corp and Prudential Financial 4125, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Prudential Financial.

Diversification Opportunities for Alcoa Corp and Prudential Financial

0.41

Correlation Coefficient

Alcoa Corp  Prudential Financial

Very weak diversification

The 3 months correlation between Alcoa and Prudential is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Prudential Financial 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 4125 and Alcoa Corp 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 Alcoa 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 4125 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Prudential Financial go up and down completely randomly.

Pair Corralation between Alcoa Corp and Prudential Financial

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Prudential Financial. In addition to that, Alcoa Corp is 3.26 times more volatile than Prudential Financial 4125. It trades about -0.01 of its total potential returns per unit of risk. Prudential Financial 4125 is currently generating about 0.0 per unit of volatility. If you would invest  1,803  in Prudential Financial 4125 on October 13, 2024 and sell it today you would lose (26.00) from holding Prudential Financial 4125 or give up 1.44% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Prudential Financial 4125

Alcoa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Prudential Financial 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Alcoa Corp and Prudential Financial

The main advantage of trading using opposite Alcoa Corp and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp and Prudential Financial 4125 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.