Correlation Between Prudential Financial and Midwest Holding

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

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

Diversification Opportunities for Prudential Financial and Midwest Holding

0.37

Correlation Coefficient

Prudential Financial  Midwest Holding

Weak diversification

The 3 months correlation between Prudential and Midwest is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Midwest Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midwest Holding 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 Midwest Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midwest Holding has no effect on the direction of Prudential Financial i.e., Prudential Financial and Midwest Holding go up and down completely randomly.

Pair Corralation between Prudential Financial and Midwest Holding

If you would invest  11,663  in Prudential Financial on September 21, 2024 and sell it today you would lose (116.00) from holding Prudential Financial or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.79%
Values	Daily Returns

Prudential Financial  vs.  Midwest Holding

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Financial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Midwest Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midwest Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Midwest Holding is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prudential Financial and Midwest Holding

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

The idea behind Prudential Financial and Midwest Holding 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.