Correlation Between Prudential Plc and Fresenius Medical

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

By analyzing existing cross correlation between Prudential plc and Fresenius Medical Care, you can compare the effects of market volatilities on Prudential Plc and Fresenius Medical 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 Plc with a short position of Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and Fresenius Medical.

Diversification Opportunities for Prudential Plc and Fresenius Medical

-0.51

Correlation Coefficient

Prudential Plc  Fresenius Medical

Excellent diversification

The 3 months correlation between Prudential and Fresenius is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and Prudential Plc 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 plc are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Prudential Plc i.e., Prudential Plc and Fresenius Medical go up and down completely randomly.

Pair Corralation between Prudential Plc and Fresenius Medical

If you would invest  2,394  in Prudential plc on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Prudential plc or generate 2.09% return on investment over 90 days.

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

Prudential plc  vs.  Fresenius Medical Care

Prudential plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prudential Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fresenius Medical 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 Plc and Fresenius Medical

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

The idea behind Prudential plc and Fresenius Medical Care 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.