Correlation Between Prudential Financial and Old Republic

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

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

Diversification Opportunities for Prudential Financial and Old Republic

0.66

Correlation Coefficient

Prudential Financial  Old Republic

Poor diversification

The 3 months correlation between Prudential and Old is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Prudential Financial i.e., Prudential Financial and Old Republic go up and down completely randomly.

Pair Corralation between Prudential Financial and Old Republic

Considering the 90-day investment horizon Prudential Financial is expected to generate 2.67 times less return on investment than Old Republic. In addition to that, Prudential Financial is 1.18 times more volatile than Old Republic International. It trades about 0.02 of its total potential returns per unit of risk. Old Republic International is currently generating about 0.07 per unit of volatility. If you would invest  1,954  in Old Republic International on January 19, 2024 and sell it today you would earn a total of  958.00  from holding Old Republic International or generate 49.03% return on investment over 90 days.

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

Prudential Financial  vs.  Old Republic International

Prudential Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Prudential Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Old Republic Interna

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential Financial and Old Republic

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

The idea behind Prudential Financial and Old Republic International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.