Correlation Between Prudential Financial and Hongli Group

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

By analyzing existing cross correlation between Prudential Financial 4125 and Hongli Group Ordinary, you can compare the effects of market volatilities on Prudential Financial and Hongli Group 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 Hongli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Hongli Group.

Diversification Opportunities for Prudential Financial and Hongli Group

-0.63

Correlation Coefficient

Prudential Financial  Hongli Group

Excellent diversification

The 3 months correlation between Prudential and Hongli is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 4125 are associated (or correlated) with Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Prudential Financial i.e., Prudential Financial and Hongli Group go up and down completely randomly.

Pair Corralation between Prudential Financial and Hongli Group

Considering the 90-day investment horizon Prudential Financial 4125 is expected to generate 0.3 times more return on investment than Hongli Group. However, Prudential Financial 4125 is 3.38 times less risky than Hongli Group. It trades about 0.1 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about 0.02 per unit of risk. If you would invest  1,820  in Prudential Financial 4125 on October 25, 2024 and sell it today you would earn a total of  51.00  from holding Prudential Financial 4125 or generate 2.8% return on investment over 90 days.

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

Prudential Financial 4125  vs.  Hongli Group Ordinary

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 latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Hongli Group Ordinary

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hongli Group Ordinary are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, Hongli Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Financial and Hongli Group

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

The idea behind Prudential Financial 4125 and Hongli Group Ordinary 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.