Correlation Between Prudential PLC and Jackson Financial

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

Diversification Opportunities for Prudential PLC and Jackson Financial

0.0

Correlation Coefficient

Prudential PLC  Jackson Financial

Pay attention - limited upside

The 3 months correlation between Prudential and Jackson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Jackson Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackson Financial 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 Jackson Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackson Financial has no effect on the direction of Prudential PLC i.e., Prudential PLC and Jackson Financial go up and down completely randomly.

Pair Corralation between Prudential PLC and Jackson Financial

Considering the 90-day investment horizon Prudential PLC ADR is expected to generate 4.32 times more return on investment than Jackson Financial. However, Prudential PLC is 4.32 times more volatile than Jackson Financial. It trades about 0.05 of its potential returns per unit of risk. Jackson Financial is currently generating about 0.1 per unit of risk. If you would invest  1,637  in Prudential PLC ADR on September 12, 2024 and sell it today you would earn a total of  83.50  from holding Prudential PLC ADR or generate 5.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Prudential PLC ADR  vs.  Jackson Financial

Prudential PLC ADR

Risk-Adjusted Performance

3 of 100

Insignificant

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

Jackson Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jackson Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jackson Financial 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 Jackson Financial

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

The idea behind Prudential PLC ADR and Jackson Financial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.