Correlation Between Prudential Financial and Genworth Financial

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

By analyzing existing cross correlation between Prudential Financial and Genworth Financial, you can compare the effects of market volatilities on Prudential Financial and Genworth 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 Prudential Financial with a short position of Genworth Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Genworth Financial.

Diversification Opportunities for Prudential Financial and Genworth Financial

0.82

Correlation Coefficient

Prudential Financial  Genworth Financial

Very poor diversification

The 3 months correlation between Prudential and Genworth is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth Financial 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 Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of Prudential Financial i.e., Prudential Financial and Genworth Financial go up and down completely randomly.

Pair Corralation between Prudential Financial and Genworth Financial

Considering the 90-day investment horizon Prudential Financial is expected to generate 1.34 times less return on investment than Genworth Financial. But when comparing it to its historical volatility, Prudential Financial is 1.38 times less risky than Genworth Financial. It trades about 0.05 of its potential returns per unit of risk. Genworth Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  527.00  in Genworth Financial on September 14, 2024 and sell it today you would earn a total of  226.00  from holding Genworth Financial or generate 42.88% return on investment over 90 days.

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

Prudential Financial  vs.  Genworth Financial

Prudential Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Genworth Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Genworth Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Genworth Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prudential Financial and Genworth Financial

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

The idea behind Prudential Financial and Genworth Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.