Correlation Between Prudential Short and Templeton Growth

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

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

Diversification Opportunities for Prudential Short and Templeton Growth

0.55

Correlation Coefficient

Prudential Short  Templeton Growth

Very weak diversification

The 3 months correlation between Prudential and Templeton is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and Templeton Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Growth and Prudential Short 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 Short Duration are associated (or correlated) with Templeton Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Growth has no effect on the direction of Prudential Short i.e., Prudential Short and Templeton Growth go up and down completely randomly.

Pair Corralation between Prudential Short and Templeton Growth

Assuming the 90 days horizon Prudential Short is expected to generate 1.39 times less return on investment than Templeton Growth. But when comparing it to its historical volatility, Prudential Short Duration is 3.49 times less risky than Templeton Growth. It trades about 0.17 of its potential returns per unit of risk. Templeton Growth Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,242  in Templeton Growth Fund on September 26, 2024 and sell it today you would earn a total of  376.00  from holding Templeton Growth Fund or generate 16.77% return on investment over 90 days.

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

Prudential Short Duration  vs.  Templeton Growth Fund

Prudential Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Templeton Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Prudential Short Duration and Templeton Growth Fund 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.