Correlation Between Health Care and Prudential Health

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

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

Diversification Opportunities for Health Care and Prudential Health

0.86

Correlation Coefficient

Health Care  Prudential Health

Very poor diversification

The 3 months correlation between Health and Prudential is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Ultrasector and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health and Health Care 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 Health Care Ultrasector are associated (or correlated) with Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Health Care i.e., Health Care and Prudential Health go up and down completely randomly.

Pair Corralation between Health Care and Prudential Health

Assuming the 90 days horizon Health Care is expected to generate 1.09 times less return on investment than Prudential Health. In addition to that, Health Care is 1.41 times more volatile than Prudential Health Sciences. It trades about 0.11 of its total potential returns per unit of risk. Prudential Health Sciences is currently generating about 0.17 per unit of volatility. If you would invest  3,198  in Prudential Health Sciences on July 6, 2025 and sell it today you would earn a total of  400.00  from holding Prudential Health Sciences or generate 12.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Health Care Ultrasector  vs.  Prudential Health Sciences

Health Care Ultrasector

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Ultrasector are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Health Care may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Prudential Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Health Sciences are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Health may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Health Care and Prudential Health

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

The idea behind Health Care Ultrasector and Prudential Health Sciences 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.