Correlation Between Prudential Financial and Baxter International
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Baxter International 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 Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Baxter International, you can compare the effects of market volatilities on Prudential Financial and Baxter International 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 Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Baxter International.
Diversification Opportunities for Prudential Financial and Baxter International
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Prudential and Baxter is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Prudential Financial i.e., Prudential Financial and Baxter International go up and down completely randomly.
Pair Corralation between Prudential Financial and Baxter International
Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.18 times more return on investment than Baxter International. However, Prudential Financial is 5.63 times less risky than Baxter International. It trades about 0.22 of its potential returns per unit of risk. Baxter International is currently generating about -0.23 per unit of risk. If you would invest 198,872 in Prudential Financial on September 12, 2024 and sell it today you would earn a total of 2,628 from holding Prudential Financial or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Financial vs. Baxter International
Performance |
| Timeline |
| Prudential Financial |
| Baxter International |
Prudential Financial and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Baxter International
The main advantage of trading using opposite Prudential Financial and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. iShares Global Timber | Prudential Financial vs. SPDR Series Trust |
| Baxter International vs. Verizon Communications | Baxter International vs. KB Home | Baxter International vs. Costco Wholesale | Baxter International vs. Grupo Hotelero Santa |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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