Correlation Between The Hartford and Prudential

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

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

Diversification Opportunities for The Hartford and Prudential

0.83

Correlation Coefficient

The Hartford  Prudential

Very poor diversification

The 3 months correlation between The and Prudential is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Equity and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate and The Hartford 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 Equity are associated (or correlated) with Prudential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of The Hartford i.e., The Hartford and Prudential go up and down completely randomly.

Pair Corralation between The Hartford and Prudential

Assuming the 90 days horizon The Hartford Equity is expected to under-perform the Prudential. In addition to that, The Hartford is 1.45 times more volatile than Prudential Real Estate. It trades about -0.32 of its total potential returns per unit of risk. Prudential Real Estate is currently generating about -0.19 per unit of volatility. If you would invest  1,630  in Prudential Real Estate on October 7, 2024 and sell it today you would lose (76.00) from holding Prudential Real Estate or give up 4.66% of portfolio value over 90 days.

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

The Hartford Equity  vs.  Prudential Real Estate

Hartford Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Hartford and Prudential

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

The idea behind The Hartford Equity and Prudential Real Estate 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.