Correlation Between Prudential Financial and Alleghany

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Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Alleghany 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 Alleghany into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Alleghany, you can compare the effects of market volatilities on Prudential Financial and Alleghany 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 Alleghany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Alleghany.

Diversification Opportunities for Prudential Financial and Alleghany

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Prudential and Alleghany is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Alleghany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alleghany 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 Alleghany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alleghany has no effect on the direction of Prudential Financial i.e., Prudential Financial and Alleghany go up and down completely randomly.

Pair Corralation between Prudential Financial and Alleghany

If you would invest  10,767  in Prudential Financial on December 29, 2023 and sell it today you would earn a total of  935.00  from holding Prudential Financial or generate 8.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy4.55%
ValuesDaily Returns

Prudential Financial  vs.  Alleghany

 Performance 
       Timeline  
Prudential Financial 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
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 comparatively weak basic indicators, Prudential Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
Alleghany 

Risk-Adjusted Performance

0 of 100

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

Prudential Financial and Alleghany Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prudential Financial and Alleghany

The main advantage of trading using opposite Prudential Financial and Alleghany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Alleghany 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 Alleghany will offset losses from the drop in Alleghany's long position.
The idea behind Prudential Financial and Alleghany 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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