Correlation Between Prudential 60/40 and Prudential Jennison

Can any of the company-specific risk be diversified away by investing in both Prudential 60/40 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 Prudential 60/40 and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential 6040 Allocation and Prudential Jennison Equity, you can compare the effects of market volatilities on Prudential 60/40 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 Prudential 60/40 with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential 60/40 and Prudential Jennison.

Diversification Opportunities for Prudential 60/40 and Prudential Jennison

-0.14

Correlation Coefficient

Prudential 60/40  Prudential Jennison

Good diversification

The 3 months correlation between PRUDENTIAL and PRUDENTIAL is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Prudential 6040 Allocation and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Prudential 60/40 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 6040 Allocation 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 Prudential 60/40 i.e., Prudential 60/40 and Prudential Jennison go up and down completely randomly.

Pair Corralation between Prudential 60/40 and Prudential Jennison

Assuming the 90 days horizon Prudential 6040 Allocation is expected to generate 0.79 times more return on investment than Prudential Jennison. However, Prudential 6040 Allocation is 1.26 times less risky than Prudential Jennison. It trades about 0.19 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about -0.02 per unit of risk. If you would invest  1,368  in Prudential 6040 Allocation on September 4, 2024 and sell it today you would earn a total of  72.00  from holding Prudential 6040 Allocation or generate 5.26% return on investment over 90 days.

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

Prudential 6040 Allocation  vs.  Prudential Jennison Equity

Prudential 6040 Allo

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential 6040 Allocation are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Prudential 60/40 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Prudential Jennison 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 60/40 and Prudential Jennison

The main advantage of trading using opposite Prudential 60/40 and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential 60/40 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 Prudential 6040 Allocation and Prudential Jennison Equity 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.