Correlation Between Globe Life and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Globe Life 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 Globe Life and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globe Life and Prudential Financial, you can compare the effects of market volatilities on Globe Life 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 Globe Life with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Life and Prudential Financial.
Diversification Opportunities for Globe Life and Prudential Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Globe and Prudential is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Globe Life 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 Globe Life 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 Globe Life i.e., Globe Life and Prudential Financial go up and down completely randomly.
Pair Corralation between Globe Life and Prudential Financial
Allowing for the 90-day total investment horizon Globe Life is expected to generate 0.91 times more return on investment than Prudential Financial. However, Globe Life is 1.1 times less risky than Prudential Financial. It trades about 0.15 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.05 per unit of risk. If you would invest 8,352 in Globe Life on August 24, 2024 and sell it today you would earn a total of 2,547 from holding Globe Life or generate 30.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Globe Life vs. Prudential Financial
Performance |
| Timeline |
| Globe Life |
| Prudential Financial |
Globe Life and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Globe Life and Prudential Financial
The main advantage of trading using opposite Globe Life and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Life 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.| Globe Life vs. Prudential Public Limited | Globe Life vs. CNO Financial Group | Globe Life vs. MetLife Preferred Stock | Globe Life vs. MetLife |
| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Unum Group | Prudential Financial vs. Manulife Financial Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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