Correlation Between HE Equipment and PRUDENTIAL

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

By analyzing existing cross correlation between HE Equipment Services and PRUDENTIAL FINL INC, you can compare the effects of market volatilities on HE Equipment and PRUDENTIAL 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 HE Equipment with a short position of PRUDENTIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and PRUDENTIAL.

Diversification Opportunities for HE Equipment and PRUDENTIAL

0.39

Correlation Coefficient

HE Equipment  PRUDENTIAL

Weak diversification

The 3 months correlation between HEES and PRUDENTIAL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and PRUDENTIAL FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRUDENTIAL FINL INC and HE Equipment 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 HE Equipment Services are associated (or correlated) with PRUDENTIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRUDENTIAL FINL INC has no effect on the direction of HE Equipment i.e., HE Equipment and PRUDENTIAL go up and down completely randomly.

Pair Corralation between HE Equipment and PRUDENTIAL

Given the investment horizon of 90 days HE Equipment Services is expected to generate 0.85 times more return on investment than PRUDENTIAL. However, HE Equipment Services is 1.18 times less risky than PRUDENTIAL. It trades about 0.29 of its potential returns per unit of risk. PRUDENTIAL FINL INC is currently generating about 0.17 per unit of risk. If you would invest  9,096  in HE Equipment Services on February 14, 2025 and sell it today you would earn a total of  502.00  from holding HE Equipment Services or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

HE Equipment Services  vs.  PRUDENTIAL FINL INC

HE Equipment Services

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment may actually be approaching a critical reversion point that can send shares even higher in June 2025.

PRUDENTIAL FINL INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PRUDENTIAL FINL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PRUDENTIAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HE Equipment and PRUDENTIAL

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

The idea behind HE Equipment Services and PRUDENTIAL FINL INC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.