Correlation Between American National and Prudential PLC

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

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

Diversification Opportunities for American National and Prudential PLC

-0.65

Correlation Coefficient

American National  Prudential PLC

Excellent diversification

The 3 months correlation between American and Prudential is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding American National Group 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 American National 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 American National Group 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 American National i.e., American National and Prudential PLC go up and down completely randomly.

Pair Corralation between American National and Prudential PLC

Assuming the 90 days trading horizon American National Group is expected to generate 0.22 times more return on investment than Prudential PLC. However, American National Group is 4.48 times less risky than Prudential PLC. It trades about 0.17 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about -0.02 per unit of risk. If you would invest  2,496  in American National Group on September 20, 2024 and sell it today you would earn a total of  31.00  from holding American National Group or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

American National Group  vs.  Prudential PLC ADR

American National

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American National Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, American National is not utilizing all of its potentials. The current 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 American National and Prudential PLC

The main advantage of trading using opposite American National and Prudential PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American National 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 American National Group 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.