Correlation Between Prudential Financial and Affiliated Managers

Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Affiliated Managers 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 Affiliated Managers 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 Affiliated Managers Group, you can compare the effects of market volatilities on Prudential Financial and Affiliated Managers 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 Affiliated Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Affiliated Managers.

Diversification Opportunities for Prudential Financial and Affiliated Managers

0.72

Correlation Coefficient

Prudential Financial  Affiliated Managers

Poor diversification

The 3 months correlation between Prudential and Affiliated is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and Affiliated Managers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Managers 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 Affiliated Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Managers has no effect on the direction of Prudential Financial i.e., Prudential Financial and Affiliated Managers go up and down completely randomly.

Pair Corralation between Prudential Financial and Affiliated Managers

Considering the 90-day investment horizon Prudential Financial 4125 is expected to under-perform the Affiliated Managers. In addition to that, Prudential Financial is 1.35 times more volatile than Affiliated Managers Group. It trades about -0.02 of its total potential returns per unit of risk. Affiliated Managers Group is currently generating about -0.01 per unit of volatility. If you would invest  2,157  in Affiliated Managers Group on December 30, 2024 and sell it today you would lose (10.00) from holding Affiliated Managers Group or give up 0.46% of portfolio value over 90 days.

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

Prudential Financial 4125  vs.  Affiliated Managers Group

Prudential Financial 4125

Risk-Adjusted Performance

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 fairly strong technical and fundamental indicators, Prudential Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Affiliated Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Affiliated Managers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Prudential Financial and Affiliated Managers

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

The idea behind Prudential Financial 4125 and Affiliated Managers Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.