Correlation Between CNO Financial and Prudential PLC

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

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

Diversification Opportunities for CNO Financial and Prudential PLC

0.79

Correlation Coefficient

CNO Financial  Prudential PLC

Poor diversification

The 3 months correlation between CNO and Prudential is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CNO Financial Group 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 CNO 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 CNO Financial Group 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 CNO Financial i.e., CNO Financial and Prudential PLC go up and down completely randomly.

Pair Corralation between CNO Financial and Prudential PLC

Considering the 90-day investment horizon CNO Financial is expected to generate 2.26 times less return on investment than Prudential PLC. But when comparing it to its historical volatility, CNO Financial Group is 1.4 times less risky than Prudential PLC. It trades about 0.16 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,585  in Prudential PLC ADR on December 29, 2024 and sell it today you would earn a total of  558.00  from holding Prudential PLC ADR or generate 35.21% return on investment over 90 days.

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

CNO Financial Group  vs.  Prudential PLC ADR

CNO Financial Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CNO Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CNO Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Prudential PLC ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential PLC ADR are ranked lower than 20 (%) 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 CNO Financial and Prudential PLC

The main advantage of trading using opposite CNO Financial and Prudential PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNO Financial 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 CNO Financial Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.