Correlation Between Prudential Plc and Kimberly Clark

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

By analyzing existing cross correlation between Prudential plc and Kimberly Clark de Mxico, you can compare the effects of market volatilities on Prudential Plc and Kimberly Clark 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 Plc with a short position of Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and Kimberly Clark.

Diversification Opportunities for Prudential Plc and Kimberly Clark

-0.37

Correlation Coefficient

Prudential Plc  Kimberly Clark

Very good diversification

The 3 months correlation between Prudential and Kimberly is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc and Kimberly Clark de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de and Prudential Plc 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 plc are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of Prudential Plc i.e., Prudential Plc and Kimberly Clark go up and down completely randomly.

Pair Corralation between Prudential Plc and Kimberly Clark

Assuming the 90 days trading horizon Prudential plc is expected to under-perform the Kimberly Clark. But the stock apears to be less risky and, when comparing its historical volatility, Prudential plc is 143.32 times less risky than Kimberly Clark. The stock trades about -0.12 of its potential returns per unit of risk. The Kimberly Clark de Mxico is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,936  in Kimberly Clark de Mxico on December 31, 2024 and sell it today you would earn a total of  422.00  from holding Kimberly Clark de Mxico or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Prudential plc  vs.  Kimberly Clark de Mxico

Prudential plc

Risk-Adjusted Performance

Very Weak

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

Kimberly Clark de

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark de Mxico are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Kimberly Clark sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Plc and Kimberly Clark

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

The idea behind Prudential plc and Kimberly Clark de Mxico 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.