Correlation Between American Equity and Prudential PLC

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

By analyzing existing cross correlation between American Equity Investment and Prudential PLC ADR, you can compare the effects of market volatilities on American Equity and Prudential PLC 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 American Equity with a short position of Prudential PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and Prudential PLC.

Diversification Opportunities for American Equity and Prudential PLC

0.0

Correlation Coefficient

American Equity  Prudential PLC

Pay attention - limited upside

The 3 months correlation between American and Prudential is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR and American Equity 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 American Equity Investment are associated (or correlated) with Prudential PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of American Equity i.e., American Equity and Prudential PLC go up and down completely randomly.

Pair Corralation between American Equity and Prudential PLC

If you would invest  1,635  in Prudential PLC ADR on November 29, 2024 and sell it today you would earn a total of  210.00  from holding Prudential PLC ADR or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

American Equity Investment  vs.  Prudential PLC ADR

American Equity Inve

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Equity Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, American Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Prudential PLC ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Prudential PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Equity and Prudential PLC

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

The idea behind American Equity Investment and Prudential PLC ADR 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.