Correlation Between CATCo Reinsurance and Prudential Plc

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

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

Diversification Opportunities for CATCo Reinsurance and Prudential Plc

-0.53

Correlation Coefficient

CATCo Reinsurance  Prudential Plc

Excellent diversification

The 3 months correlation between CATCo and Prudential is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CATCo Reinsurance Opportunitie and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc and CATCo Reinsurance 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 CATCo Reinsurance Opportunities 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 has no effect on the direction of CATCo Reinsurance i.e., CATCo Reinsurance and Prudential Plc go up and down completely randomly.

Pair Corralation between CATCo Reinsurance and Prudential Plc

Assuming the 90 days trading horizon CATCo Reinsurance Opportunities is expected to generate 1.58 times more return on investment than Prudential Plc. However, CATCo Reinsurance is 1.58 times more volatile than Prudential plc. It trades about 0.07 of its potential returns per unit of risk. Prudential plc is currently generating about -0.04 per unit of risk. If you would invest  2,400  in CATCo Reinsurance Opportunities on September 21, 2024 and sell it today you would earn a total of  1,762  from holding CATCo Reinsurance Opportunities or generate 73.42% return on investment over 90 days.

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

CATCo Reinsurance Opportunitie  vs.  Prudential plc

CATCo Reinsurance

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CATCo Reinsurance Opportunities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CATCo Reinsurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Prudential plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Prudential Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CATCo Reinsurance and Prudential Plc

The main advantage of trading using opposite CATCo Reinsurance and Prudential Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATCo Reinsurance 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 CATCo Reinsurance Opportunities and Prudential plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.