Correlation Between Prudential Jennison and Vanguard Short-term

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

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

Diversification Opportunities for Prudential Jennison and Vanguard Short-term

-0.36

Correlation Coefficient

Prudential Jennison  Vanguard Short-term

Very good diversification

The 3 months correlation between Prudential and Vanguard is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Vanguard Short Term Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Prudential Jennison 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 Jennison Financial are associated (or correlated) with Vanguard Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Vanguard Short-term go up and down completely randomly.

Pair Corralation between Prudential Jennison and Vanguard Short-term

Assuming the 90 days horizon Prudential Jennison Financial is expected to under-perform the Vanguard Short-term. In addition to that, Prudential Jennison is 14.44 times more volatile than Vanguard Short Term Government. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Short Term Government is currently generating about 0.34 per unit of volatility. If you would invest  2,415  in Vanguard Short Term Government on December 24, 2024 and sell it today you would earn a total of  40.00  from holding Vanguard Short Term Government or generate 1.66% return on investment over 90 days.

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

Prudential Jennison Financial  vs.  Vanguard Short Term Government

Prudential Jennison

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Jennison Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Short Term

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Government are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Short-term 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 Jennison and Vanguard Short-term

The main advantage of trading using opposite Prudential Jennison and Vanguard Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Vanguard Short-term 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 Vanguard Short-term will offset losses from the drop in Vanguard Short-term's long position.

The idea behind Prudential Jennison Financial and Vanguard Short Term Government 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.