Correlation Between Prudential Financial and Walmart

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

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

Diversification Opportunities for Prudential Financial and Walmart

-0.61

Correlation Coefficient

Prudential Financial  Walmart

Excellent diversification

The 3 months correlation between Prudential and Walmart is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Prudential Financial i.e., Prudential Financial and Walmart go up and down completely randomly.

Pair Corralation between Prudential Financial and Walmart

Assuming the 90 days trading horizon Prudential Financial is expected to generate 11.01 times less return on investment than Walmart. But when comparing it to its historical volatility, Prudential Financial is 9.33 times less risky than Walmart. It trades about 0.04 of its potential returns per unit of risk. Walmart is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,328  in Walmart on October 10, 2024 and sell it today you would earn a total of  1,632  from holding Walmart or generate 37.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Prudential Financial  vs.  Walmart

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prudential Financial and Walmart

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

The idea behind Prudential Financial and Walmart 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.