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

0.92

Correlation Coefficient

Prudential Financial  Affiliated Managers

Almost no diversification

The 3 months correlation between Prudential and Affiliated is 0.92. 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. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial 4125 is 1.24 times less risky than Affiliated Managers. The stock trades about -0.37 of its potential returns per unit of risk. The Affiliated Managers Group, is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  1,949  in Affiliated Managers Group, on September 24, 2024 and sell it today you would lose (80.00) from holding Affiliated Managers Group, or give up 4.1% of portfolio value over 90 days.

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

Prudential Financial 4125  vs.  Affiliated Managers Group,

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Affiliated Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Managers Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.