Correlation Between Prudential Financial and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and The Travelers Companies, you can compare the effects of market volatilities on Prudential Financial and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Travelers Companies.
Diversification Opportunities for Prudential Financial and Travelers Companies
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Travelers is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Prudential Financial i.e., Prudential Financial and Travelers Companies go up and down completely randomly.
Pair Corralation between Prudential Financial and Travelers Companies
Considering the 90-day investment horizon Prudential Financial is expected to generate 0.41 times more return on investment than Travelers Companies. However, Prudential Financial is 2.41 times less risky than Travelers Companies. It trades about -0.33 of its potential returns per unit of risk. The Travelers Companies is currently generating about -0.15 per unit of risk. If you would invest 11,533 in Prudential Financial on January 20, 2024 and sell it today you would lose (663.00) from holding Prudential Financial or give up 5.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Financial vs. The Travelers Companies
Performance |
| Timeline |
| Prudential Financial |
| The Travelers Companies |
Prudential Financial and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Travelers Companies
The main advantage of trading using opposite Prudential Financial and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. Unum Group |
| Travelers Companies vs. Progressive Corp | Travelers Companies vs. Chubb | Travelers Companies vs. Cincinnati Financial | Travelers Companies vs. W R Berkley |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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