Correlation Between Hartford Healthcare and Prudential Financial

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

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

Diversification Opportunities for Hartford Healthcare and Prudential Financial

0.48

Correlation Coefficient

Hartford Healthcare  Prudential Financial

Very weak diversification

The 3 months correlation between Hartford and Prudential is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Healthcare and Prudential Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Hartford Healthcare 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 The Hartford Healthcare 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 Hartford Healthcare i.e., Hartford Healthcare and Prudential Financial go up and down completely randomly.

Pair Corralation between Hartford Healthcare and Prudential Financial

Assuming the 90 days horizon The Hartford Healthcare is expected to under-perform the Prudential Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Hartford Healthcare is 1.12 times less risky than Prudential Financial. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Prudential Financial Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,409  in Prudential Financial Services on October 24, 2024 and sell it today you would lose (5.00) from holding Prudential Financial Services or give up 0.21% of portfolio value over 90 days.

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

The Hartford Healthcare  vs.  Prudential Financial Services

The Hartford Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hartford Healthcare and Prudential Financial

The main advantage of trading using opposite Hartford Healthcare and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Healthcare 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 The Hartford Healthcare and Prudential Financial Services 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.