Correlation Between Prudential Plc and Scottish Mortgage

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

By analyzing existing cross correlation between Prudential plc and Scottish Mortgage Investment, you can compare the effects of market volatilities on Prudential Plc and Scottish Mortgage 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 Scottish Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and Scottish Mortgage.

Diversification Opportunities for Prudential Plc and Scottish Mortgage

-0.06

Correlation Coefficient

Prudential Plc  Scottish Mortgage

Good diversification

The 3 months correlation between Prudential and Scottish is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage 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 are associated (or correlated) with Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of Prudential Plc i.e., Prudential Plc and Scottish Mortgage go up and down completely randomly.

Pair Corralation between Prudential Plc and Scottish Mortgage

Assuming the 90 days horizon Prudential plc is expected to generate 1.06 times more return on investment than Scottish Mortgage. However, Prudential Plc is 1.06 times more volatile than Scottish Mortgage Investment. It trades about 0.14 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.05 per unit of risk. If you would invest  795.00  in Prudential plc on December 24, 2024 and sell it today you would earn a total of  137.00  from holding Prudential plc or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Prudential plc  vs.  Scottish Mortgage Investment

Prudential plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Prudential Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Scottish Mortgage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottish Mortgage may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prudential Plc and Scottish Mortgage

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

The idea behind Prudential plc and Scottish Mortgage Investment 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..