Correlation Between Short Duration and Prudential Jennison

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

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

Diversification Opportunities for Short Duration and Prudential Jennison

0.54

Correlation Coefficient

Short Duration  Prudential Jennison

Very weak diversification

The 3 months correlation between Short and Prudential is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Prudential Jennison Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Short Duration 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 Short Duration Inflation 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 Short Duration i.e., Short Duration and Prudential Jennison go up and down completely randomly.

Pair Corralation between Short Duration and Prudential Jennison

Assuming the 90 days horizon Short Duration Inflation is expected to under-perform the Prudential Jennison. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Duration Inflation is 1.81 times less risky than Prudential Jennison. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Prudential Jennison International is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,928  in Prudential Jennison International on September 21, 2024 and sell it today you would lose (22.00) from holding Prudential Jennison International or give up 0.75% of portfolio value over 90 days.

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

Short Duration Inflation  vs.  Prudential Jennison Internatio

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration 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

0 of 100

Very Weak

Over the last 90 days Prudential Jennison International has generated negative risk-adjusted returns adding no value to fund investors. 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 Short Duration and Prudential Jennison

The main advantage of trading using opposite Short Duration and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration 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 Short Duration Inflation and Prudential Jennison International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.