Correlation Between Leader Short and Prudential Jennison

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

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

Diversification Opportunities for Leader Short and Prudential Jennison

-0.5

Correlation Coefficient

Leader Short  Prudential Jennison

Very good diversification

The 3 months correlation between Leader and Prudential is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Leader Short Term Bond 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 Leader 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 Leader Short Term Bond 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 Leader Short i.e., Leader Short and Prudential Jennison go up and down completely randomly.

Pair Corralation between Leader Short and Prudential Jennison

Assuming the 90 days horizon Leader Short Term Bond is expected to generate 0.19 times more return on investment than Prudential Jennison. However, Leader Short Term Bond is 5.39 times less risky than Prudential Jennison. It trades about 0.19 of its potential returns per unit of risk. Prudential Jennison Small is currently generating about -0.1 per unit of risk. If you would invest  804.00  in Leader Short Term Bond on December 21, 2024 and sell it today you would earn a total of  19.00  from holding Leader Short Term Bond or generate 2.36% return on investment over 90 days.

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

Leader Short Term Bond  vs.  Prudential Jennison Small

Leader Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leader Short Term Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Leader Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 basic 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 Leader Short and Prudential Jennison

The main advantage of trading using opposite Leader Short and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Short 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 Leader Short Term Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.