Correlation Between State Street and Prudential Health
Can any of the company-specific risk be diversified away by investing in both State Street and Prudential 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 State Street and Prudential Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Equity and Prudential Health Sciences, you can compare the effects of market volatilities on State Street and Prudential 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 State Street with a short position of Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Prudential Health.
Diversification Opportunities for State Street and Prudential Health
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between State and Prudential is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and State Street 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 State Street Equity are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of State Street i.e., State Street and Prudential Health go up and down completely randomly.
Pair Corralation between State Street and Prudential Health
Assuming the 90 days horizon State Street Equity is expected to generate 0.92 times more return on investment than Prudential Health. However, State Street Equity is 1.08 times less risky than Prudential Health. It trades about 0.13 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about 0.06 per unit of risk. If you would invest 34,139 in State Street Equity on September 12, 2024 and sell it today you would earn a total of 21,382 from holding State Street Equity or generate 62.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Equity vs. Prudential Health Sciences
Performance |
| Timeline |
| State Street Equity |
| Prudential Health |
State Street and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Prudential Health
The main advantage of trading using opposite State Street and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Prudential 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 Prudential Health will offset losses from the drop in Prudential Health's long position.| State Street vs. Vanguard Total Stock | State Street vs. Vanguard 500 Index | State Street vs. Vanguard Total Stock | State Street vs. Vanguard Total Stock |
| Prudential Health vs. Sp Midcap Index | Prudential Health vs. Extended Market Index | Prudential Health vs. Ab All Market | Prudential Health vs. Aqr Long Short Equity |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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