Correlation Between Prudential Jennison and Prudential Emerging

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

Diversification Opportunities for Prudential Jennison and Prudential Emerging

-0.34

Correlation Coefficient

Prudential Jennison  Prudential Emerging

Very good diversification

The 3 months correlation between Prudential and Prudential is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Small Cap and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging 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 Prudential Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Emerging has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential Emerging go up and down completely randomly.

Pair Corralation between Prudential Jennison and Prudential Emerging

Assuming the 90 days horizon Prudential Jennison Small Cap is expected to under-perform the Prudential Emerging. In addition to that, Prudential Jennison is 7.07 times more volatile than Prudential Emerging Markets. It trades about -0.25 of its total potential returns per unit of risk. Prudential Emerging Markets is currently generating about -0.2 per unit of volatility. If you would invest  454.00  in Prudential Emerging Markets on September 27, 2024 and sell it today you would lose (6.00) from holding Prudential Emerging Markets or give up 1.32% of portfolio value over 90 days.

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

Prudential Jennison Small Cap  vs.  Prudential Emerging Markets

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.

Prudential Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Prudential Jennison and Prudential Emerging

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

The idea behind Prudential Jennison Small Cap and Prudential Emerging Markets 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.