Correlation Between Prudential Financial and Seagate Technology

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

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

Diversification Opportunities for Prudential Financial and Seagate Technology

0.43

Correlation Coefficient

Prudential Financial  Seagate Technology

Very weak diversification

The 3 months correlation between Prudential and Seagate is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology and Prudential Financial 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 Prudential Financial are associated (or correlated) with Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology has no effect on the direction of Prudential Financial i.e., Prudential Financial and Seagate Technology go up and down completely randomly.

Pair Corralation between Prudential Financial and Seagate Technology

Assuming the 90 days trading horizon Prudential Financial is expected to under-perform the Seagate Technology. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial is 1.9 times less risky than Seagate Technology. The stock trades about -0.18 of its potential returns per unit of risk. The Seagate Technology Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  54,152  in Seagate Technology Holdings on December 27, 2024 and sell it today you would lose (4,580) from holding Seagate Technology Holdings or give up 8.46% of portfolio value over 90 days.

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

Prudential Financial  vs.  Seagate Technology Holdings

Prudential Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seagate Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seagate Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Prudential Financial and Seagate Technology

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

The idea behind Prudential Financial and Seagate Technology Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.