Correlation Between Jennison Natural and Beck Mack

Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Beck Mack 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 Beck Mack 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 Beck Mack Oliver, you can compare the effects of market volatilities on Jennison Natural and Beck Mack 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 Beck Mack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Beck Mack.

Diversification Opportunities for Jennison Natural and Beck Mack

0.61

Correlation Coefficient

Jennison Natural  Beck Mack

Poor diversification

The 3 months correlation between Jennison and Beck is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Beck Mack Oliver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beck Mack Oliver 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 Beck Mack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beck Mack Oliver has no effect on the direction of Jennison Natural i.e., Jennison Natural and Beck Mack go up and down completely randomly.

Pair Corralation between Jennison Natural and Beck Mack

Assuming the 90 days horizon Jennison Natural Resources is expected to generate 1.29 times more return on investment than Beck Mack. However, Jennison Natural is 1.29 times more volatile than Beck Mack Oliver. It trades about 0.06 of its potential returns per unit of risk. Beck Mack Oliver is currently generating about -0.1 per unit of risk. If you would invest  3,866  in Jennison Natural Resources on December 20, 2024 and sell it today you would earn a total of  165.00  from holding Jennison Natural Resources or generate 4.27% 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.  Beck Mack Oliver

Jennison Natural Res

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jennison Natural Resources are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jennison Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Beck Mack Oliver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beck Mack Oliver has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Jennison Natural and Beck Mack

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

The idea behind Jennison Natural Resources and Beck Mack Oliver 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.