Correlation Between Unum and Prudential Financial

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

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

Diversification Opportunities for Unum and Prudential Financial

0.95

Correlation Coefficient

Unum  Prudential Financial

Almost no diversification

The 3 months correlation between Unum and Prudential is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Unum 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 Unum Group 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 has no effect on the direction of Unum i.e., Unum and Prudential Financial go up and down completely randomly.

Pair Corralation between Unum and Prudential Financial

Considering the 90-day investment horizon Unum Group is expected to generate 1.19 times more return on investment than Prudential Financial. However, Unum is 1.19 times more volatile than Prudential Financial. It trades about 0.06 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.03 per unit of risk. If you would invest  3,203  in Unum Group on February 1, 2024 and sell it today you would earn a total of  1,867  from holding Unum Group or generate 58.29% return on investment over 90 days.

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

Unum Group  vs.  Prudential Financial

Unum Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unum Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Unum may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Prudential Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 9 (%) 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 June 2024.

Pair Trading with Unum and Prudential Financial

The main advantage of trading using opposite Unum and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unum 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 Unum Group and Prudential Financial 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.