Correlation Between Sterling Capital and Prudential Jennison

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

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

Diversification Opportunities for Sterling Capital and Prudential Jennison

0.31

Correlation Coefficient

Sterling Capital  Prudential Jennison

Weak diversification

The 3 months correlation between Sterling and Prudential is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and Prudential Jennison Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison Mid and Sterling Capital 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 Sterling Capital Short 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 Mid has no effect on the direction of Sterling Capital i.e., Sterling Capital and Prudential Jennison go up and down completely randomly.

Pair Corralation between Sterling Capital and Prudential Jennison

Assuming the 90 days horizon Sterling Capital is expected to generate 24.61 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Sterling Capital Short is 7.62 times less risky than Prudential Jennison. It trades about 0.07 of its potential returns per unit of risk. Prudential Jennison Mid Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,091  in Prudential Jennison Mid Cap on September 13, 2024 and sell it today you would earn a total of  259.00  from holding Prudential Jennison Mid Cap or generate 12.39% return on investment over 90 days.

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

Sterling Capital Short  vs.  Prudential Jennison Mid Cap

Sterling Capital Short

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Short are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison Mid

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Mid Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sterling Capital and Prudential Jennison

The main advantage of trading using opposite Sterling Capital and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital 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 Sterling Capital Short and Prudential Jennison Mid Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.