Correlation Between Prudential Jennison and World Energy

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

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

Diversification Opportunities for Prudential Jennison and World Energy

0.82

Correlation Coefficient

Prudential Jennison  World Energy

Very poor diversification

The 3 months correlation between Prudential and World is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Small Cap and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 Small Cap are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and World Energy go up and down completely randomly.

Pair Corralation between Prudential Jennison and World Energy

Assuming the 90 days horizon Prudential Jennison is expected to generate 1.08 times less return on investment than World Energy. In addition to that, Prudential Jennison is 1.09 times more volatile than World Energy Fund. It trades about 0.04 of its total potential returns per unit of risk. World Energy Fund is currently generating about 0.05 per unit of volatility. If you would invest  1,207  in World Energy Fund on September 30, 2024 and sell it today you would earn a total of  232.00  from holding World Energy Fund or generate 19.22% return on investment over 90 days.

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

Prudential Jennison Small Cap  vs.  World Energy Fund

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, World Energy 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 World Energy

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

The idea behind Prudential Jennison Small Cap and World Energy Fund 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 Transaction History module to view history of all your transactions and understand their impact on performance.