Correlation Between Clover Health and Prudential Financial

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

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

Diversification Opportunities for Clover Health and Prudential Financial

-0.54

Correlation Coefficient

Clover Health  Prudential Financial

Excellent diversification

The 3 months correlation between Clover and Prudential is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and Prudential Financial go up and down completely randomly.

Pair Corralation between Clover Health and Prudential Financial

Assuming the 90 days trading horizon Clover Health Investments, is expected to generate 2.6 times more return on investment than Prudential Financial. However, Clover Health is 2.6 times more volatile than Prudential Financial. It trades about 0.49 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.38 per unit of risk. If you would invest  2,004  in Clover Health Investments, on October 22, 2024 and sell it today you would earn a total of  488.00  from holding Clover Health Investments, or generate 24.35% return on investment over 90 days.

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

Clover Health Investments,  vs.  Prudential Financial

Clover Health Invest

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Prudential Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Prudential Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Clover Health and Prudential Financial

The main advantage of trading using opposite Clover Health and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments, 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.