Correlation Between Prudential Financial and Grupo Industrial

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

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

Diversification Opportunities for Prudential Financial and Grupo Industrial

0.48

Correlation Coefficient

Prudential Financial  Grupo Industrial

Very weak diversification

The 3 months correlation between Prudential and Grupo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Grupo Industrial Saltillo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Industrial Saltillo 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 Grupo Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Industrial Saltillo has no effect on the direction of Prudential Financial i.e., Prudential Financial and Grupo Industrial go up and down completely randomly.

Pair Corralation between Prudential Financial and Grupo Industrial

Assuming the 90 days trading horizon Prudential Financial is expected to generate 3.11 times more return on investment than Grupo Industrial. However, Prudential Financial is 3.11 times more volatile than Grupo Industrial Saltillo. It trades about 0.3 of its potential returns per unit of risk. Grupo Industrial Saltillo is currently generating about 0.25 per unit of risk. If you would invest  201,500  in Prudential Financial on October 26, 2024 and sell it today you would earn a total of  42,500  from holding Prudential Financial or generate 21.09% return on investment over 90 days.

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

Prudential Financial  vs.  Grupo Industrial Saltillo

Prudential Financial

Risk-Adjusted Performance

14 of 100

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.

Grupo Industrial Saltillo

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Industrial Saltillo are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Prudential Financial and Grupo Industrial

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

The idea behind Prudential Financial and Grupo Industrial Saltillo 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.