Correlation Between Blackrock Health and Prudential Financial

Can any of the company-specific risk be diversified away by investing in both Blackrock 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 Blackrock 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 Blackrock Health Sciences and Prudential Financial Services, you can compare the effects of market volatilities on Blackrock 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 Blackrock Health with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Health and Prudential Financial.

Diversification Opportunities for Blackrock Health and Prudential Financial

-0.67

Correlation Coefficient

Blackrock Health  Prudential Financial

Excellent diversification

The 3 months correlation between Blackrock and Prudential is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Health Sciences and Prudential Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Blackrock 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 Blackrock Health Sciences 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 Blackrock Health i.e., Blackrock Health and Prudential Financial go up and down completely randomly.

Pair Corralation between Blackrock Health and Prudential Financial

Assuming the 90 days horizon Blackrock Health Sciences is expected to under-perform the Prudential Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Blackrock Health Sciences is 1.17 times less risky than Prudential Financial. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Prudential Financial Services is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,295  in Prudential Financial Services on September 14, 2024 and sell it today you would earn a total of  236.00  from holding Prudential Financial Services or generate 10.28% return on investment over 90 days.

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

Blackrock Health Sciences  vs.  Prudential Financial Services

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Prudential Financial

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial Services are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blackrock Health and Prudential Financial

The main advantage of trading using opposite Blackrock Health and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock 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 Blackrock Health Sciences 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..