Correlation Between Franklin High and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Franklin High 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 Franklin High and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Prudential Jennison Servative, you can compare the effects of market volatilities on Franklin High 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 Franklin High with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Prudential Jennison.
Diversification Opportunities for Franklin High and Prudential Jennison
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Prudential is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Prudential Jennison Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Franklin High 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 Franklin High Yield 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 Franklin High i.e., Franklin High and Prudential Jennison go up and down completely randomly.
Pair Corralation between Franklin High and Prudential Jennison
Assuming the 90 days horizon Franklin High is expected to generate 27.53 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Franklin High Yield is 3.34 times less risky than Prudential Jennison. It trades about 0.02 of its potential returns per unit of risk. Prudential Jennison Servative is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,980 in Prudential Jennison Servative on September 14, 2024 and sell it today you would earn a total of 199.00 from holding Prudential Jennison Servative or generate 10.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin High Yield vs. Prudential Jennison Servative
Performance |
Timeline |
Franklin High Yield |
Prudential Jennison |
Franklin High and Prudential Jennison Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin High and Prudential Jennison
The main advantage of trading using opposite Franklin High and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High 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.Franklin High vs. Blackrock High Yield | Franklin High vs. Voya High Yield | Franklin High vs. Guggenheim High Yield | Franklin High vs. Gmo High Yield |
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Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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