Correlation Between Qs Us and Prudential Jennison

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

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

Diversification Opportunities for Qs Us and Prudential Jennison

0.95

Correlation Coefficient

Qs Us  Prudential Jennison

Almost no diversification

The 3 months correlation between LMUSX and Prudential is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Qs Large Cap and Prudential Jennison Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Qs Us 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 Qs Large Cap 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 Qs Us i.e., Qs Us and Prudential Jennison go up and down completely randomly.

Pair Corralation between Qs Us and Prudential Jennison

Assuming the 90 days horizon Qs Large Cap is expected to generate 0.93 times more return on investment than Prudential Jennison. However, Qs Large Cap is 1.07 times less risky than Prudential Jennison. It trades about -0.11 of its potential returns per unit of risk. Prudential Jennison Small Cap is currently generating about -0.15 per unit of risk. If you would invest  2,488  in Qs Large Cap on December 23, 2024 and sell it today you would lose (176.00) from holding Qs Large Cap or give up 7.07% of portfolio value over 90 days.

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

Qs Large Cap  vs.  Prudential Jennison Small Cap

Qs Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qs Large Cap 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.

Prudential Jennison

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Jennison Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Qs Us and Prudential Jennison

The main advantage of trading using opposite Qs Us and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Us 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 Qs Large Cap and Prudential Jennison Small 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.