Correlation Between Prudential PLC and Aviva PLC

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

Diversification Opportunities for Prudential PLC and Aviva PLC

0.62

Correlation Coefficient

Prudential PLC  Aviva PLC

Poor diversification

The 3 months correlation between Prudential and Aviva is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Aviva PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviva PLC ADR 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 Aviva PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviva PLC ADR has no effect on the direction of Prudential PLC i.e., Prudential PLC and Aviva PLC go up and down completely randomly.

Pair Corralation between Prudential PLC and Aviva PLC

If you would invest  1,040  in Aviva PLC ADR on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Aviva PLC ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.37%
Values	Daily Returns

Prudential PLC ADR  vs.  Aviva PLC ADR

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Aviva PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential PLC and Aviva PLC

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

The idea behind Prudential PLC ADR and Aviva 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.