Correlation Between Prudential Financial and Gmo Global

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

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

Diversification Opportunities for Prudential Financial and Gmo Global

0.54

Correlation Coefficient

Prudential Financial  Gmo Global

Very weak diversification

The 3 months correlation between Prudential and Gmo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and Gmo Global Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Developed 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 Services are associated (or correlated) with Gmo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Developed has no effect on the direction of Prudential Financial i.e., Prudential Financial and Gmo Global go up and down completely randomly.

Pair Corralation between Prudential Financial and Gmo Global

Assuming the 90 days horizon Prudential Financial Services is expected to under-perform the Gmo Global. In addition to that, Prudential Financial is 1.22 times more volatile than Gmo Global Developed. It trades about -0.31 of its total potential returns per unit of risk. Gmo Global Developed is currently generating about -0.23 per unit of volatility. If you would invest  2,706  in Gmo Global Developed on October 9, 2024 and sell it today you would lose (160.00) from holding Gmo Global Developed or give up 5.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Prudential Financial Services  vs.  Gmo Global Developed

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Global Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Global Developed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gmo Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Financial and Gmo Global

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

The idea behind Prudential Financial Services and Gmo Global Developed 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.