Correlation Between Prudential Public and Aflac Incorporated

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

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

Diversification Opportunities for Prudential Public and Aflac Incorporated

0.29

Correlation Coefficient

Prudential Public  Aflac Incorporated

Modest diversification

The 3 months correlation between Prudential and Aflac is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Public Limited and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Prudential Public 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 Prudential Public Limited are associated (or correlated) with Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of Prudential Public i.e., Prudential Public and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Prudential Public and Aflac Incorporated

Considering the 90-day investment horizon Prudential Public Limited is expected to under-perform the Aflac Incorporated. In addition to that, Prudential Public is 1.9 times more volatile than Aflac Incorporated. It trades about 0.0 of its total potential returns per unit of risk. Aflac Incorporated is currently generating about 0.07 per unit of volatility. If you would invest  10,858  in Aflac Incorporated on August 31, 2024 and sell it today you would earn a total of  552.00  from holding Aflac Incorporated or generate 5.08% return on investment over 90 days.

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

Prudential Public Limited  vs.  Aflac Incorporated

Prudential Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Prudential Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aflac Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aflac Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Prudential Public and Aflac Incorporated

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

The idea behind Prudential Public Limited and Aflac Incorporated 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.