Correlation Between Nasdaq and Prudential Plc

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

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

Diversification Opportunities for Nasdaq and Prudential Plc

-0.52

Correlation Coefficient

Nasdaq  Prudential Plc

Excellent diversification

The 3 months correlation between Nasdaq and Prudential is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Prudential Plc go up and down completely randomly.

Pair Corralation between Nasdaq and Prudential Plc

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Prudential Plc. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.39 times less risky than Prudential Plc. The stock trades about -0.17 of its potential returns per unit of risk. The Prudential plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  63,540  in Prudential plc on September 22, 2024 and sell it today you would lose (700.00) from holding Prudential plc or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Nasdaq Inc  vs.  Prudential plc

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nasdaq and Prudential Plc

The main advantage of trading using opposite Nasdaq and Prudential Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.