Correlation Between Microsoft and Prudential Jennison

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

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

Diversification Opportunities for Microsoft and Prudential Jennison

0.28

Correlation Coefficient

Microsoft  Prudential Jennison

Modest diversification

The 3 months correlation between Microsoft and Prudential is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Prudential Jennison Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Prudential Jennison go up and down completely randomly.

Pair Corralation between Microsoft and Prudential Jennison

Given the investment horizon of 90 days Microsoft is expected to generate 1.78 times more return on investment than Prudential Jennison. However, Microsoft is 1.78 times more volatile than Prudential Jennison Global. It trades about 0.07 of its potential returns per unit of risk. Prudential Jennison Global is currently generating about 0.04 per unit of risk. If you would invest  26,128  in Microsoft on December 4, 2024 and sell it today you would earn a total of  12,721  from holding Microsoft or generate 48.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Microsoft  vs.  Prudential Jennison Global

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Prudential Jennison

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Jennison Global 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 Microsoft and Prudential Jennison

The main advantage of trading using opposite Microsoft and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft and Prudential Jennison Global 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.