Correlation Between Prudential Jennison and Mid Cap

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

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

Diversification Opportunities for Prudential Jennison and Mid Cap

0.77

Correlation Coefficient

Prudential Jennison  Mid Cap

Poor diversification

The 3 months correlation between Prudential and Mid is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Growth and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Growth are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Mid Cap go up and down completely randomly.

Pair Corralation between Prudential Jennison and Mid Cap

Assuming the 90 days horizon Prudential Jennison Growth is expected to generate 1.13 times more return on investment than Mid Cap. However, Prudential Jennison is 1.13 times more volatile than Mid Cap Growth. It trades about 0.09 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.09 per unit of risk. If you would invest  4,897  in Prudential Jennison Growth on October 5, 2024 and sell it today you would earn a total of  1,794  from holding Prudential Jennison Growth or generate 36.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Prudential Jennison Growth  vs.  Mid Cap Growth

Prudential Jennison

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Growth are ranked lower than 9 (%) 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 February 2025.

Mid Cap Growth

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Prudential Jennison and Mid Cap

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

The idea behind Prudential Jennison Growth and Mid Cap Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.