Correlation Between Ping An and Prudential Plc

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

By analyzing existing cross correlation between Ping An Insurance and Prudential plc, you can compare the effects of market volatilities on Ping An 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 Ping An with a short position of Prudential Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Prudential Plc.

Diversification Opportunities for Ping An and Prudential Plc

0.53

Correlation Coefficient

Ping An  Prudential Plc

Very weak diversification

The 3 months correlation between Ping and Prudential is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc and Ping An 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 Ping An Insurance 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 has no effect on the direction of Ping An i.e., Ping An and Prudential Plc go up and down completely randomly.

Pair Corralation between Ping An and Prudential Plc

Assuming the 90 days horizon Ping An Insurance is expected to under-perform the Prudential Plc. In addition to that, Ping An is 1.62 times more volatile than Prudential plc. It trades about -0.09 of its total potential returns per unit of risk. Prudential plc is currently generating about 0.04 per unit of volatility. If you would invest  775.00  in Prudential plc on October 26, 2024 and sell it today you would earn a total of  9.00  from holding Prudential plc or generate 1.16% return on investment over 90 days.

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

Ping An Insurance  vs.  Prudential plc

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Prudential plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prudential Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ping An and Prudential Plc

The main advantage of trading using opposite Ping An and Prudential Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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 Ping An Insurance and Prudential plc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.