Correlation Between Prudential PLC and Ping An

Can any of the company-specific risk be diversified away by investing in both Prudential PLC and Ping An 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 Ping An 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 Ping An Insurance, you can compare the effects of market volatilities on Prudential PLC and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential PLC and Ping An.

Diversification Opportunities for Prudential PLC and Ping An

0.38

Correlation Coefficient

Prudential PLC  Ping An

Weak diversification

The 3 months correlation between Prudential and Ping is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Prudential PLC i.e., Prudential PLC and Ping An go up and down completely randomly.

Pair Corralation between Prudential PLC and Ping An

Considering the 90-day investment horizon Prudential PLC ADR is expected to under-perform the Ping An. But the stock apears to be less risky and, when comparing its historical volatility, Prudential PLC ADR is 1.8 times less risky than Ping An. The stock trades about 0.0 of its potential returns per unit of risk. The Ping An Insurance is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Ping An Insurance on September 18, 2024 and sell it today you would lose (7.00) from holding Ping An Insurance or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Prudential PLC ADR  vs.  Ping An Insurance

Prudential PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ping An Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ping An showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential PLC and Ping An

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

The idea behind Prudential PLC ADR and Ping An Insurance 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.