Correlation Between Prudential Financial and Globe Life

Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Globe Life 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 Globe Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Financial 4125 and Globe Life 425, you can compare the effects of market volatilities on Prudential Financial and Globe Life 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 Globe Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Globe Life.

Diversification Opportunities for Prudential Financial and Globe Life

0.9

Correlation Coefficient

Prudential Financial  Globe Life

Almost no diversification

The 3 months correlation between Prudential and Globe is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and Globe Life 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life 425 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 4125 are associated (or correlated) with Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life 425 has no effect on the direction of Prudential Financial i.e., Prudential Financial and Globe Life go up and down completely randomly.

Pair Corralation between Prudential Financial and Globe Life

Considering the 90-day investment horizon Prudential Financial 4125 is expected to under-perform the Globe Life. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial 4125 is 1.32 times less risky than Globe Life. The stock trades about -0.37 of its potential returns per unit of risk. The Globe Life 425 is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  1,719  in Globe Life 425 on September 24, 2024 and sell it today you would lose (76.00) from holding Globe Life 425 or give up 4.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Prudential Financial 4125  vs.  Globe Life 425

Prudential Financial 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Globe Life 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life 425 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Prudential Financial and Globe Life

The main advantage of trading using opposite Prudential Financial and Globe Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Globe Life 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 Globe Life will offset losses from the drop in Globe Life's long position.

The idea behind Prudential Financial 4125 and Globe Life 425 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.