Correlation Between Vericity and Prudential PLC

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

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

Diversification Opportunities for Vericity and Prudential PLC

-0.15

Correlation Coefficient

Vericity  Prudential PLC

Good diversification

The 3 months correlation between Vericity and Prudential is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vericity and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR and Vericity 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 Vericity are associated (or correlated) with Prudential PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of Vericity i.e., Vericity and Prudential PLC go up and down completely randomly.

Pair Corralation between Vericity and Prudential PLC

Given the investment horizon of 90 days Vericity is expected to generate 2.83 times more return on investment than Prudential PLC. However, Vericity is 2.83 times more volatile than Prudential PLC ADR. It trades about 0.04 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about -0.04 per unit of risk. If you would invest  750.00  in Vericity on September 20, 2024 and sell it today you would earn a total of  393.00  from holding Vericity or generate 52.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.41%
Values	Daily Returns

Vericity  vs.  Prudential PLC ADR

Vericity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vericity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vericity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vericity and Prudential PLC

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

The idea behind Vericity and Prudential PLC ADR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.