Correlation Between Globus Medical, and Prudential Financial

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

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

Diversification Opportunities for Globus Medical, and Prudential Financial

0.94

Correlation Coefficient

Globus Medical,  Prudential Financial

Almost no diversification

The 3 months correlation between Globus and Prudential is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Globus Medical, and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Globus Medical, 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 Globus Medical, 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 Globus Medical, i.e., Globus Medical, and Prudential Financial go up and down completely randomly.

Pair Corralation between Globus Medical, and Prudential Financial

Assuming the 90 days trading horizon Globus Medical, is expected to generate 1.33 times more return on investment than Prudential Financial. However, Globus Medical, is 1.33 times more volatile than Prudential Financial. It trades about 0.05 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.23 per unit of risk. If you would invest  6,438  in Globus Medical, on October 4, 2024 and sell it today you would earn a total of  72.00  from holding Globus Medical, or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	89.47%
Values	Daily Returns

Globus Medical,  vs.  Prudential Financial

Globus Medical,

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Globus Medical, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak primary indicators, Globus Medical, sustained solid returns over the last few months and may actually be approaching a breakup point.

Prudential Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Prudential Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Globus Medical, and Prudential Financial

The main advantage of trading using opposite Globus Medical, and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globus Medical, 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 Globus Medical, 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.