Correlation Between Dai Ichi and Prudential Financial

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

By analyzing existing cross correlation between Dai ichi Life Holdings and Prudential Financial, you can compare the effects of market volatilities on Dai Ichi and Prudential 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 Dai Ichi with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dai Ichi and Prudential Financial.

Diversification Opportunities for Dai Ichi and Prudential Financial

0.57

Correlation Coefficient

Dai Ichi  Prudential Financial

Very weak diversification

The 3 months correlation between Dai and Prudential is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dai ichi Life Holdings and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Dai Ichi 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 Dai ichi Life Holdings are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Dai Ichi i.e., Dai Ichi and Prudential Financial go up and down completely randomly.

Pair Corralation between Dai Ichi and Prudential Financial

Assuming the 90 days horizon Dai ichi Life Holdings is expected to generate 1.1 times more return on investment than Prudential Financial. However, Dai Ichi is 1.1 times more volatile than Prudential Financial. It trades about 0.15 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.03 per unit of risk. If you would invest  550.00  in Dai ichi Life Holdings on April 20, 2025 and sell it today you would earn a total of  90.00  from holding Dai ichi Life Holdings or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Dai ichi Life Holdings  vs.  Prudential Financial

Dai ichi Life

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dai ichi Life Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dai Ichi reported solid returns over the last few months and may actually be approaching a breakup point.

Prudential Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Prudential Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dai Ichi and Prudential Financial

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

The idea behind Dai ichi Life Holdings and Prudential 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.