Correlation Between Prudential Jennison and Adams Natural

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

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

Diversification Opportunities for Prudential Jennison and Adams Natural

0.22

Correlation Coefficient

Prudential Jennison  Adams Natural

Modest diversification

The 3 months correlation between Prudential and Adams is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Equity and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources 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 Equity are associated (or correlated) with Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Adams Natural go up and down completely randomly.

Pair Corralation between Prudential Jennison and Adams Natural

Assuming the 90 days horizon Prudential Jennison is expected to generate 1.86 times less return on investment than Adams Natural. But when comparing it to its historical volatility, Prudential Jennison Equity is 1.65 times less risky than Adams Natural. It trades about 0.13 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,067  in Adams Natural Resources on December 21, 2024 and sell it today you would earn a total of  205.00  from holding Adams Natural Resources or generate 9.92% return on investment over 90 days.

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

Prudential Jennison Equity  vs.  Adams Natural Resources

Prudential Jennison

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Equity are ranked lower than 10 (%) 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.

Adams Natural Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prudential Jennison and Adams Natural

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

The idea behind Prudential Jennison Equity and Adams Natural Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.