Correlation Between First Northern and Prudential PLC

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

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

Diversification Opportunities for First Northern and Prudential PLC

0.54

Correlation Coefficient

First Northern  Prudential PLC

Very weak diversification

The 3 months correlation between First and Prudential is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Northern Community 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 First Northern 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 First Northern Community 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 First Northern i.e., First Northern and Prudential PLC go up and down completely randomly.

Pair Corralation between First Northern and Prudential PLC

Given the investment horizon of 90 days First Northern is expected to generate 1.25 times less return on investment than Prudential PLC. But when comparing it to its historical volatility, First Northern Community is 1.51 times less risky than Prudential PLC. It trades about 0.21 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,178  in Prudential PLC ADR on May 5, 2025 and sell it today you would earn a total of  324.00  from holding Prudential PLC ADR or generate 14.88% return on investment over 90 days.

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

First Northern Community  vs.  Prudential PLC ADR

First Northern Community

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Northern Community are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Northern may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Prudential PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Prudential PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Northern and Prudential PLC

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

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.