Correlation Between Enhanced Fixed and Prudential Jennison

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

By analyzing existing cross correlation between Enhanced Fixed Income and Prudential Jennison Equity, you can compare the effects of market volatilities on Enhanced Fixed and Prudential Jennison 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 Enhanced Fixed with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Fixed and Prudential Jennison.

Diversification Opportunities for Enhanced Fixed and Prudential Jennison

0.92

Correlation Coefficient

Enhanced Fixed  Prudential Jennison

Almost no diversification

The 3 months correlation between Enhanced and Prudential is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Fixed Income and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Enhanced Fixed 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 Enhanced Fixed Income are associated (or correlated) with Prudential Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Jennison has no effect on the direction of Enhanced Fixed i.e., Enhanced Fixed and Prudential Jennison go up and down completely randomly.

Pair Corralation between Enhanced Fixed and Prudential Jennison

Assuming the 90 days horizon Enhanced Fixed is expected to generate 2.29 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Enhanced Fixed Income is 2.39 times less risky than Prudential Jennison. It trades about 0.13 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,339  in Prudential Jennison Equity on December 23, 2024 and sell it today you would earn a total of  68.00  from holding Prudential Jennison Equity or generate 5.08% return on investment over 90 days.

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

Enhanced Fixed Income  vs.  Prudential Jennison Equity

Enhanced Fixed Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Fixed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Enhanced Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enhanced Fixed and Prudential Jennison

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

The idea behind Enhanced Fixed Income and Prudential Jennison Equity 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.