Correlation Between Federal Life and Prudential Financial

Can any of the company-specific risk be diversified away by investing in both Federal 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 Federal 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 Federal Life Group and Prudential Financial 5950, you can compare the effects of market volatilities on Federal 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 Federal Life with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Life and Prudential Financial.

Diversification Opportunities for Federal Life and Prudential Financial

0.7

Correlation Coefficient

Federal Life  Prudential Financial

Poor diversification

The 3 months correlation between Federal and Prudential is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Federal Life Group and Prudential Financial 5950 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 5950 and Federal 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 Federal Life Group 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 5950 has no effect on the direction of Federal Life i.e., Federal Life and Prudential Financial go up and down completely randomly.

Pair Corralation between Federal Life and Prudential Financial

If you would invest  2,573  in Prudential Financial 5950 on September 2, 2024 and sell it today you would earn a total of  29.00  from holding Prudential Financial 5950 or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Federal Life Group  vs.  Prudential Financial 5950

Federal Life Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Life Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Federal Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Prudential Financial 5950

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial 5950 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Federal Life and Prudential Financial

The main advantage of trading using opposite Federal Life and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal 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.

The idea behind Federal Life Group and Prudential Financial 5950 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.