Correlation Between Prudential Financial and Fibra UNO

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

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

Diversification Opportunities for Prudential Financial and Fibra UNO

0.7

Correlation Coefficient

Prudential Financial  Fibra UNO

Poor diversification

The 3 months correlation between Prudential and Fibra is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Fibra UNO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra UNO 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 are associated (or correlated) with Fibra UNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra UNO has no effect on the direction of Prudential Financial i.e., Prudential Financial and Fibra UNO go up and down completely randomly.

Pair Corralation between Prudential Financial and Fibra UNO

Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.35 times more return on investment than Fibra UNO. However, Prudential Financial is 1.35 times more volatile than Fibra UNO. It trades about 0.18 of its potential returns per unit of risk. Fibra UNO is currently generating about 0.11 per unit of risk. If you would invest  199,243  in Prudential Financial on December 4, 2024 and sell it today you would earn a total of  44,757  from holding Prudential Financial or generate 22.46% return on investment over 90 days.

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

Prudential Financial  vs.  Fibra UNO

Prudential Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Prudential Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Fibra UNO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fibra UNO are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibra UNO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prudential Financial and Fibra UNO

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

The idea behind Prudential Financial and Fibra UNO 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.