Correlation Between Prudential PLC and Powerof Canada

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

Diversification Opportunities for Prudential PLC and Powerof Canada

0.9

Correlation Coefficient

Prudential PLC  Powerof Canada

Almost no diversification

The 3 months correlation between Prudential and Powerof is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Power of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerof Canada 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 Powerof Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerof Canada has no effect on the direction of Prudential PLC i.e., Prudential PLC and Powerof Canada go up and down completely randomly.

Pair Corralation between Prudential PLC and Powerof Canada

Considering the 90-day investment horizon Prudential PLC ADR is expected to generate 1.43 times more return on investment than Powerof Canada. However, Prudential PLC is 1.43 times more volatile than Power of. It trades about 0.25 of its potential returns per unit of risk. Power of is currently generating about 0.15 per unit of risk. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Prudential PLC ADR  vs.  Power of

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.

Powerof Canada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Powerof Canada reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential PLC and Powerof Canada

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

The idea behind Prudential PLC ADR and Power of 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.