Correlation Between Amazon and Prudential Jennison

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

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

Diversification Opportunities for Amazon and Prudential Jennison

0.82

Correlation Coefficient

Amazon  Prudential Jennison

Very poor diversification

The 3 months correlation between Amazon and Prudential is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Prudential Jennison Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison Small and Amazon 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 Amazon Inc 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 Small has no effect on the direction of Amazon i.e., Amazon and Prudential Jennison go up and down completely randomly.

Pair Corralation between Amazon and Prudential Jennison

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Prudential Jennison. In addition to that, Amazon is 1.53 times more volatile than Prudential Jennison Small. It trades about -0.12 of its total potential returns per unit of risk. Prudential Jennison Small is currently generating about -0.11 per unit of volatility. If you would invest  2,386  in Prudential Jennison Small on December 30, 2024 and sell it today you would lose (188.00) from holding Prudential Jennison Small or give up 7.88% of portfolio value over 90 days.

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

Amazon Inc  vs.  Prudential Jennison Small

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Prudential Jennison Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Jennison Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amazon and Prudential Jennison

The main advantage of trading using opposite Amazon and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon Inc and Prudential Jennison Small 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.