Correlation Between Prudential Jennison and Invesco Convertible

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

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

Diversification Opportunities for Prudential Jennison and Invesco Convertible

0.89

Correlation Coefficient

Prudential Jennison  Invesco Convertible

Very poor diversification

The 3 months correlation between Prudential and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Mid Cap and Invesco Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Vertible Sec 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 Mid Cap are associated (or correlated) with Invesco Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Vertible Sec has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Invesco Convertible go up and down completely randomly.

Pair Corralation between Prudential Jennison and Invesco Convertible

Assuming the 90 days horizon Prudential Jennison Mid Cap is expected to generate 1.92 times more return on investment than Invesco Convertible. However, Prudential Jennison is 1.92 times more volatile than Invesco Vertible Securities. It trades about 0.05 of its potential returns per unit of risk. Invesco Vertible Securities is currently generating about 0.09 per unit of risk. If you would invest  2,337  in Prudential Jennison Mid Cap on October 25, 2024 and sell it today you would earn a total of  86.00  from holding Prudential Jennison Mid Cap or generate 3.68% return on investment over 90 days.

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

Prudential Jennison Mid Cap  vs.  Invesco Vertible Securities

Prudential Jennison Mid

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Mid Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Invesco Vertible Sec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Vertible Securities are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco Convertible 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 Invesco Convertible

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

The idea behind Prudential Jennison Mid Cap and Invesco Vertible Securities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.