Correlation Between Prudential Financial and Universal Health

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

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

Diversification Opportunities for Prudential Financial and Universal Health

-0.4

Correlation Coefficient

Prudential Financial  Universal Health

Very good diversification

The 3 months correlation between Prudential and Universal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Universal Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Ser 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Ser has no effect on the direction of Prudential Financial i.e., Prudential Financial and Universal Health go up and down completely randomly.

Pair Corralation between Prudential Financial and Universal Health

Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.73 times more return on investment than Universal Health. However, Prudential Financial is 1.36 times less risky than Universal Health. It trades about 0.03 of its potential returns per unit of risk. Universal Health Services, is currently generating about -0.15 per unit of risk. If you would invest  35,308  in Prudential Financial on October 25, 2024 and sell it today you would earn a total of  717.00  from holding Prudential Financial or generate 2.03% return on investment over 90 days.

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

Prudential Financial  vs.  Universal Health Services,

Prudential Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Health Ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Health Services, 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 technical indicators remain somewhat 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 company investors.

Pair Trading with Prudential Financial and Universal Health

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

The idea behind Prudential Financial and Universal Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.