Correlation Between Deutsche Health and Prudential Financial

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

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

Diversification Opportunities for Deutsche Health and Prudential Financial

0.5

Correlation Coefficient

Deutsche Health  Prudential Financial

Very weak diversification

The 3 months correlation between DEUTSCHE and Prudential is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Health And and Prudential Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Deutsche Health 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 Deutsche Health And 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 Deutsche Health i.e., Deutsche Health and Prudential Financial go up and down completely randomly.

Pair Corralation between Deutsche Health and Prudential Financial

Assuming the 90 days horizon Deutsche Health And is expected to generate 0.64 times more return on investment than Prudential Financial. However, Deutsche Health And is 1.55 times less risky than Prudential Financial. It trades about 0.08 of its potential returns per unit of risk. Prudential Financial Services is currently generating about -0.02 per unit of risk. If you would invest  4,059  in Deutsche Health And on December 31, 2024 and sell it today you would earn a total of  145.00  from holding Deutsche Health And or generate 3.57% return on investment over 90 days.

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

Deutsche Health And  vs.  Prudential Financial Services

Deutsche Health And

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Health And are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Deutsche Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Financial

Risk-Adjusted Performance

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 Deutsche Health and Prudential Financial

The main advantage of trading using opposite Deutsche Health and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Health 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 Deutsche Health And 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.