Correlation Between Prudential PLC and Atlantic American

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

Diversification Opportunities for Prudential PLC and Atlantic American

0.87

Correlation Coefficient

Prudential PLC  Atlantic American

Very poor diversification

The 3 months correlation between Prudential and Atlantic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Atlantic American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic American 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 Atlantic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic American has no effect on the direction of Prudential PLC i.e., Prudential PLC and Atlantic American go up and down completely randomly.

Pair Corralation between Prudential PLC and Atlantic American

Considering the 90-day investment horizon Prudential PLC is expected to generate 2.45 times less return on investment than Atlantic American. But when comparing it to its historical volatility, Prudential PLC ADR is 2.83 times less risky than Atlantic American. It trades about 0.18 of its potential returns per unit of risk. Atlantic American is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Atlantic American on May 6, 2025 and sell it today you would earn a total of  62.00  from holding Atlantic American or generate 38.04% return on investment over 90 days.

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

Prudential PLC ADR  vs.  Atlantic American

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 14 (%) 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.

Atlantic American

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantic American are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Atlantic American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential PLC and Atlantic American

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

The idea behind Prudential PLC ADR and Atlantic American 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 Global Correlations module to find global opportunities by holding instruments from different markets.