Correlation Between Hartford Healthcare and Prudential Health

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

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

Diversification Opportunities for Hartford Healthcare and Prudential Health

0.94

Correlation Coefficient

Hartford Healthcare  Prudential Health

Almost no diversification

The 3 months correlation between HARTFORD and Prudential is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Healthcare Hls and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health 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 Hartford Healthcare Hls are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Hartford Healthcare i.e., Hartford Healthcare and Prudential Health go up and down completely randomly.

Pair Corralation between Hartford Healthcare and Prudential Health

Assuming the 90 days horizon Hartford Healthcare Hls is expected to under-perform the Prudential Health. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hartford Healthcare Hls is 1.11 times less risky than Prudential Health. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Prudential Health Sciences is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  4,346  in Prudential Health Sciences on September 3, 2024 and sell it today you would lose (190.00) from holding Prudential Health Sciences or give up 4.37% of portfolio value over 90 days.

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

Hartford Healthcare Hls  vs.  Prudential Health Sciences

Hartford Healthcare Hls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Healthcare Hls has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Prudential Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Health 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 Health

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

The idea behind Hartford Healthcare Hls and Prudential Health Sciences 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.