Correlation Between Prudential Jennison and Prudential 6040

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Prudential 6040 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 Jennison and Prudential 6040 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Jennison Equity and Prudential 6040 Allocation, you can compare the effects of market volatilities on Prudential Jennison and Prudential 6040 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 Jennison with a short position of Prudential 6040. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Prudential 6040.

Diversification Opportunities for Prudential Jennison and Prudential 6040

0.81

Correlation Coefficient

Prudential Jennison  Prudential 6040

Very poor diversification

The 3 months correlation between Prudential and Prudential is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Equity and Prudential 6040 Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 6040 Allo and Prudential Jennison 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 Jennison Equity are associated (or correlated) with Prudential 6040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential 6040 Allo has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential 6040 go up and down completely randomly.

Pair Corralation between Prudential Jennison and Prudential 6040

Assuming the 90 days horizon Prudential Jennison Equity is expected to generate 1.43 times more return on investment than Prudential 6040. However, Prudential Jennison is 1.43 times more volatile than Prudential 6040 Allocation. It trades about -0.01 of its potential returns per unit of risk. Prudential 6040 Allocation is currently generating about -0.06 per unit of risk. If you would invest  1,197  in Prudential Jennison Equity on December 2, 2024 and sell it today you would lose (11.00) from holding Prudential Jennison Equity or give up 0.92% of portfolio value over 90 days.

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

Prudential Jennison Equity  vs.  Prudential 6040 Allocation

Prudential Jennison

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Jennison Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential 6040 Allo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential 6040 Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Prudential 6040 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Jennison and Prudential 6040

The main advantage of trading using opposite Prudential Jennison and Prudential 6040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Prudential 6040 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 6040 will offset losses from the drop in Prudential 6040's long position.

The idea behind Prudential Jennison Equity and Prudential 6040 Allocation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.