Correlation Between Prudential Financial and Universal Stainless

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

Diversification Opportunities for Prudential Financial and Universal Stainless

-0.59

Correlation Coefficient

Prudential Financial  Universal Stainless

Excellent diversification

The 3 months correlation between Prudential and Universal is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy 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 Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of Prudential Financial i.e., Prudential Financial and Universal Stainless go up and down completely randomly.

Pair Corralation between Prudential Financial and Universal Stainless

Considering the 90-day investment horizon Prudential Financial 4125 is expected to under-perform the Universal Stainless. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial 4125 is 3.33 times less risky than Universal Stainless. The stock trades about -0.05 of its potential returns per unit of risk. The Universal Stainless Alloy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,212  in Universal Stainless Alloy on August 30, 2024 and sell it today you would earn a total of  229.00  from holding Universal Stainless Alloy or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Prudential Financial 4125  vs.  Universal Stainless Alloy

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 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.

Universal Stainless Alloy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Prudential Financial and Universal Stainless

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

The idea behind Prudential Financial 4125 and Universal Stainless Alloy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.