Correlation Between Prudential PLC and Royal Bank

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

Diversification Opportunities for Prudential PLC and Royal Bank

0.87

Correlation Coefficient

Prudential PLC  Royal Bank

Very poor diversification

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

Pair Corralation between Prudential PLC and Royal Bank

Considering the 90-day investment horizon Prudential PLC ADR is expected to generate 1.58 times more return on investment than Royal Bank. However, Prudential PLC is 1.58 times more volatile than Royal Bank of. It trades about 0.18 of its potential returns per unit of risk. Royal Bank of is currently generating about 0.15 per unit of risk. If you would invest  2,169  in Prudential PLC ADR on May 6, 2025 and sell it today you would earn a total of  333.00  from holding Prudential PLC ADR or generate 15.35% 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.  Royal Bank of

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.

Royal Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Royal Bank may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Prudential PLC and Royal Bank

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

The idea behind Prudential PLC ADR and Royal Bank of 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 Commodity Directory module to find actively traded commodities issued by global exchanges.