Correlation Between Leggmason Partners and Prudential Jennison

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Can any of the company-specific risk be diversified away by investing in both Leggmason Partners 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 Leggmason Partners and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leggmason Partners Institutional and Prudential Jennison Small, you can compare the effects of market volatilities on Leggmason Partners 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 Leggmason Partners with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggmason Partners and Prudential Jennison.

Diversification Opportunities for Leggmason Partners and Prudential Jennison

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Leggmason and Prudential is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Leggmason Partners Institution 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 Leggmason Partners 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 Leggmason Partners Institutional 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 Leggmason Partners i.e., Leggmason Partners and Prudential Jennison go up and down completely randomly.

Pair Corralation between Leggmason Partners and Prudential Jennison

If you would invest  2,039  in Prudential Jennison Small on September 4, 2024 and sell it today you would earn a total of  248.00  from holding Prudential Jennison Small or generate 12.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Leggmason Partners Institution  vs.  Prudential Jennison Small

 Performance 
       Timeline  
Leggmason Partners 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Leggmason Partners Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leggmason Partners 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

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Small are ranked lower than 15 (%) 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.

Leggmason Partners and Prudential Jennison Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Leggmason Partners and Prudential Jennison

The main advantage of trading using opposite Leggmason Partners and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggmason Partners 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 Leggmason Partners Institutional 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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