Correlation Between Prudential PLC and FG Annuities

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

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

Diversification Opportunities for Prudential PLC and FG Annuities

0.33

Correlation Coefficient

Prudential PLC  FG Annuities

Weak diversification

The 3 months correlation between Prudential and FG Annuities is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and FG Annuities Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Annuities Life and Prudential PLC 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 PLC ADR are associated (or correlated) with FG Annuities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Annuities Life has no effect on the direction of Prudential PLC i.e., Prudential PLC and FG Annuities go up and down completely randomly.

Pair Corralation between Prudential PLC and FG Annuities

Considering the 90-day investment horizon Prudential PLC ADR is expected to generate 0.75 times more return on investment than FG Annuities. However, Prudential PLC ADR is 1.33 times less risky than FG Annuities. It trades about 0.09 of its potential returns per unit of risk. FG Annuities Life is currently generating about -0.09 per unit of risk. If you would invest  1,635  in Prudential PLC ADR on November 28, 2024 and sell it today you would earn a total of  154.00  from holding Prudential PLC ADR or generate 9.42% return on investment over 90 days.

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

Prudential PLC ADR  vs.  FG Annuities Life

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 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Prudential PLC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

FG Annuities Life

Risk-Adjusted Performance

Very Weak

Over the last 90 days FG Annuities Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Prudential PLC and FG Annuities

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

The idea behind Prudential PLC ADR and FG Annuities Life 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.