Correlation Between Globe Life and Prudential Public

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

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

Diversification Opportunities for Globe Life and Prudential Public

0.79

Correlation Coefficient

Globe Life  Prudential Public

Poor diversification

The 3 months correlation between Globe and Prudential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life and Prudential Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Public and Globe 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 Globe Life are associated (or correlated) with Prudential Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Public has no effect on the direction of Globe Life i.e., Globe Life and Prudential Public go up and down completely randomly.

Pair Corralation between Globe Life and Prudential Public

Allowing for the 90-day total investment horizon Globe Life is expected to generate 5.43 times more return on investment than Prudential Public. However, Globe Life is 5.43 times more volatile than Prudential Public Limited. It trades about 0.03 of its potential returns per unit of risk. Prudential Public Limited is currently generating about 0.08 per unit of risk. If you would invest  10,761  in Globe Life on February 9, 2024 and sell it today you would lose (1,812) from holding Globe Life or give up 16.84% of portfolio value over 90 days.

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

Globe Life  vs.  Prudential Public Limited

Globe Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Prudential Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Prudential Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Globe Life and Prudential Public

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

The idea behind Globe Life and Prudential Public Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.