Correlation Between Jennison Natural and Prudential Qma

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

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

Diversification Opportunities for Jennison Natural and Prudential Qma

0.7

Correlation Coefficient

Jennison Natural  Prudential Qma

Poor diversification

The 3 months correlation between Jennison and Prudential is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Prudential Qma Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Qma Mid and Jennison Natural 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 Jennison Natural Resources are associated (or correlated) with Prudential Qma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Qma Mid has no effect on the direction of Jennison Natural i.e., Jennison Natural and Prudential Qma go up and down completely randomly.

Pair Corralation between Jennison Natural and Prudential Qma

Assuming the 90 days horizon Jennison Natural is expected to generate 1.27 times less return on investment than Prudential Qma. In addition to that, Jennison Natural is 1.38 times more volatile than Prudential Qma Mid Cap. It trades about 0.09 of its total potential returns per unit of risk. Prudential Qma Mid Cap is currently generating about 0.16 per unit of volatility. If you would invest  2,472  in Prudential Qma Mid Cap on September 4, 2024 and sell it today you would earn a total of  201.00  from holding Prudential Qma Mid Cap or generate 8.13% return on investment over 90 days.

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

Jennison Natural Resources  vs.  Prudential Qma Mid Cap

Jennison Natural Res

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jennison Natural Resources are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Jennison Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Qma Mid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Qma Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Qma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jennison Natural and Prudential Qma

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

The idea behind Jennison Natural Resources and Prudential Qma Mid 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.