Correlation Between Reinsurance Group and Prudential Financial

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

By analyzing existing cross correlation between Reinsurance Group of and Prudential Financial 5950, you can compare the effects of market volatilities on Reinsurance Group and Prudential Financial 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 Reinsurance Group with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Prudential Financial.

Diversification Opportunities for Reinsurance Group and Prudential Financial

0.32

Correlation Coefficient

Reinsurance Group  Prudential Financial

Weak diversification

The 3 months correlation between Reinsurance and Prudential is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Prudential Financial 5950 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 5950 and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial 5950 has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Prudential Financial go up and down completely randomly.

Pair Corralation between Reinsurance Group and Prudential Financial

Considering the 90-day investment horizon Reinsurance Group of is expected to generate 0.6 times more return on investment than Prudential Financial. However, Reinsurance Group of is 1.67 times less risky than Prudential Financial. It trades about 0.06 of its potential returns per unit of risk. Prudential Financial 5950 is currently generating about -0.01 per unit of risk. If you would invest  2,455  in Reinsurance Group of on November 19, 2024 and sell it today you would earn a total of  34.00  from holding Reinsurance Group of or generate 1.38% return on investment over 90 days.

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

Reinsurance Group of  vs.  Prudential Financial 5950

Reinsurance Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Reinsurance Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Prudential Financial 5950

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Financial 5950 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Reinsurance Group and Prudential Financial

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

The idea behind Reinsurance Group of and Prudential Financial 5950 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.