Correlation Between Prudential Jennison and Multi-manager High

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Multi-manager High 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 Multi-manager High 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 Multi Manager High Yield, you can compare the effects of market volatilities on Prudential Jennison and Multi-manager High 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 Multi-manager High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Multi-manager High.

Diversification Opportunities for Prudential Jennison and Multi-manager High

0.68

Correlation Coefficient

Prudential Jennison  Multi-manager High

Poor diversification

The 3 months correlation between Prudential and Multi-manager is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Mid Cap and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High 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 Multi-manager High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Multi-manager High go up and down completely randomly.

Pair Corralation between Prudential Jennison and Multi-manager High

Assuming the 90 days horizon Prudential Jennison Mid Cap is expected to generate 4.53 times more return on investment than Multi-manager High. However, Prudential Jennison is 4.53 times more volatile than Multi Manager High Yield. It trades about 0.05 of its potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.14 per unit of risk. If you would invest  1,876  in Prudential Jennison Mid Cap on October 11, 2024 and sell it today you would earn a total of  443.00  from holding Prudential Jennison Mid Cap or generate 23.61% return on investment over 90 days.

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

Prudential Jennison Mid Cap  vs.  Multi Manager High Yield

Prudential Jennison Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Mid Cap 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.

Multi Manager High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi-manager High 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 Multi-manager High

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

The idea behind Prudential Jennison Mid Cap and Multi Manager High Yield 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.