Correlation Between Prudential Financial and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Selective Insurance 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 Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Selective Insurance Group, you can compare the effects of market volatilities on Prudential Financial and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Selective Insurance.
Diversification Opportunities for Prudential Financial and Selective Insurance
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Prudential and Selective is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Prudential Financial i.e., Prudential Financial and Selective Insurance go up and down completely randomly.
Pair Corralation between Prudential Financial and Selective Insurance
Considering the 90-day investment horizon Prudential Financial is expected to generate 0.78 times more return on investment than Selective Insurance. However, Prudential Financial is 1.28 times less risky than Selective Insurance. It trades about 0.04 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.04 per unit of risk. If you would invest 10,731 in Prudential Financial on January 20, 2024 and sell it today you would earn a total of 139.00 from holding Prudential Financial or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Prudential Financial vs. Selective Insurance Group
Performance |
| Timeline |
| Prudential Financial |
| Selective Insurance |
Prudential Financial and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Selective Insurance
The main advantage of trading using opposite Prudential Financial and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. Unum Group |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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